The Economist's Digest 11

The panic about the dollar
(Originally from The Economist Dec.1~7, 2007)
Summary:
The developed countries’ economy seems to be warm again, especially the USA. However, there is another crisis after the credit downturn—the collapse of dollar. Both the down dollar and rise euro would limit the economic development in both region, US &EU.
In the past, dollar was the main powerful currency (貨幣) in the world; however, when euro comes up, appear the threat of investors switching from one to the other. Yet it’s not the main cause for the possible collapse of dollar. What really matter are what exactly is making the dollar falling down and the reaction of the government.
In order to import less and export more, a weaker dollar really works. America fears recession; thus the Fed cut rates. If it’s still going to cut rates, finally a weak dollar is the end. Furthermore, the credit problem is another problem that cause the slide of the dollar. The eruption point is definitely the subprime mortage crisis.
There’s other danger that threats EU and US. One is China, who links its currency to the dollar. Another is the rising price of oil, which also makes the Gulf states (波灣國家) decide to meet to modify their currency.
A good policy will reduce the damage----First, the UA government should care their currency. Yet the fact is that the US government let their dollar expose to danger just for an export growth; it’ll hurt America’s economy. Another solution to the down dollar is to seek help from countries, whose currency depend on dollar. Because they need not sell dollars----this also hurts their economy.
One the other hand, China and the oil-rich Gulf states play important parts this time. The Chinese doesn’t want their “customers’ money” shrink; they must come up with some ways.

What I think:
The credit crisis has really triggered a little downturn in dollar! Will it remain? If so, the world economy has to face a dramatic change. This can’t drag down Taiwan; no one would safe us, neither China. We can’t link our economy too tightly with US and China. EU and Australia may be a good trade partner, but they’re not good friends.
Even if the US will be safe, Taiwan’s economy may be not. Not until our chaotic political environment improves do our economy rise. The entrepreneur must think about other solutions; don’t just escape to China.