Good posting. Scraping the dollar is an ongoing debate in all parts of southeast asia. Malaysia and their fearless leader Mahathir is among the first to preach this mantra. However, to say its an attempt to go back to the dinar put a religious connotation on the whole thing. Religion has nothing to do with it.
“It’s very important for us to have an alternative currency to the dollar when we trade,” Mahathir said last week.
Mahathir has valid reasons to be concerned about the dollar’s role. In the age of globalization, where goods are exported, imported and in many case re-imported, it makes sense to make payments in the currencies with which you transact. At a minimum, it would lower costs for Asian importers and exporters when they do business in Europe.
Reducing Asia’s reliance on exports to the US is another plus. Anyone wondering about the health of Asia’s economies need look no further than the West Coast of the US. It’s there you’ll see the biggest cracks in Asia’s recovery.
A recent shutdown at US docks nearly dragged the region’s economies into recession. The ports have reopened, but the episode was instructive. That a faraway labor dispute could have done what a US recession, Japanese deflation and European gloom didn’t raises questions about Southeast Asia’s economic health.
The euro also may be appealing because it lacks a domestic agenda. The US is quite adept at steering the dollar up and down depending on economic trends. In the early 1990s, for example, a lower dollar was favored to boost growth.
Later in the decade the White House favored a rising currency to attract foreign capital. Since 12 countries use Europe’s single currency, it may be less susceptible to unpredictable political agendas. Also, the European Central Bank, not politicians, manages it.
Problem with this whole arguement is that the euro still can't hold its own in terms of world currencies. “Basically,” the Malaysian leader said, “the euro is not standing on its own legs yet.”
If and when it ever does they'll change. Believe it.