Last fall, one of our Southeastern Asia clients called to ask whether we thought his US customer would be willing to pay for his products in yen rather than US greenbacks. He was unwilling to take the exchange risk any longer.
Could this signal the beginning of the end for the dollar's role as the world's reserve currency?
If so, what are the ramifications.
Since then, we have discovered many other companies throughout SE Asia and the Pacific Rim that are changing their sales policies and denominating their letters of credit in their own currency or the yen.
Clearly, things are changing.
The Contract with America was seen by many overseas people as a ray of hope that finally the US would attempt to get its financial house in order.
However, the Democrats in the Senate prevented a balanced budget amendment from going to the states for ratification despite passage in the House. Once again, foreign politicians, financiers, and business people see a Congress that is unwilling to address a primary concern of theirs . . . the flood of greenbacks and their decline in value.
In January 1993 when Clinton took office, the yen was at 120, today the dollar markets appear extremely nervous and the slide could go lower. Today, the greenback has lost almost 25% of its value against the yen in just over two years.
In 1992, several of our Japanese contacts were organizing their operations to be competitive in the US market if the yen went to 80. It appears to be on its way.
Congress passed NAFTA and GATT despite considerable opposition from small and medium sized businesses in the US. It was supposed to benefit trade. Yet today, the trade imbalance with Japan continues to grow. The multi nationals have benefited but many privately owned companies have not.
Trade with Mexico boomed for a period. However, the precipitous fall of the peso has created a situation where many border towns are almost in a state of severe depression.
Moreover, the bailout being proposed by the Clinton administration is lending more fuel to the belief that the US deficit and the larger problem of the $4.7 trillion national debt will never be addressed except through repudiation.
Last week I met with several 50-60 year old former employees of a Garland, TX based company that had relocated last summer to Mexico. Their unemployment benefits were running out and they were having a difficult time finding jobs despite their years of experience. Many had lost their possible pension benefits, had no group health insurance anymore and were extremely depressed. Two were facing foreclosure on their homes and three had seen their automobiles repossessed.
One young social-services counselor with a degree from North Texas University suggested that they get retraining during our meeting. She was visibly upset when she discovered that they were almost all computer literate, non-management personnel with critical skills despite having been with the company for over 20 years.
One had an MBA, two had Master's in engineering, and a third had a BBA in Computer Science.
Perhaps, as Pogo says, The Enemy is US!
Besides making a profit, don't we as owners & managers have a responsibility to build a society that can provide meaningful employment for our employees?
The real problem is that this company's management decided to downsize to achieve some short-term profits and hire $4.00 per hour labor in a foreign country to do the work these people had performed at considerably higher salaries.
However, since this company's products are installed in automobiles costing an average of $18,000 each, I wonder how many of their workers will be able to afford one. Perhaps, they are not worried about future demand.
It always amazes me that most American trade negotiators do not understand the Japanese psyche.
To really solve the problem, American business must learn to do business the Japanese way. To really get change, you have to stand firm, be willing to take drastic steps and have a formidable weapon.
Only brute force will succeed! They are still Samurai and they will fight to the death or exhaustion using all the skill, guile and market share at their disposal.
Since automobiles and electronics constitute the bulk of the trade balance surplus for Japan, the only way to get them to open up their markets for our products is to just close our markets to all of their electronics and automobiles. Period. No increased tariffs on selected items. Just close the market.
When you finally hit them in the pocket book and then submit to their government a bill for their national defense coverage for the years since 1945 and for all the technology that they have stolen from American businesses plus interest, they will finally decide to open their markets. Any thing less won't work.
Start withdrawing all armed forces personnel from Japan tomorrow. With the developing China economy growing faster than any in Asia, the Japanese will quickly decide that they need protection from the US. Many of their business leaders have stated over the years that with the burden of military spending being absorbed by the US, the Japanese economy was left to make substantial inroads in the world markets. MITI spent billions on stealing technology from Europe and the US, and more billions improving it to compete economically with Europe and the US.
Make no mistake. The Japanese elite have known that they were in a trade war since 1950. Only the US did not. They were determined to use every means available to win that war.
To have a growing economy, Americans need jobs . . . and more importantly, high-paying jobs. We can not export all of our technical and manufacturing jobs overseas. True wealth is only created through manufacturing and/or natural resource development.
You can not just provide service jobs in either the private or government sectors and expect to have a vibrant, growing economy.
We have many problems to confront . . . crime, education, jobs, health, aging, etc., . . . but almost all of them won't be solved until we are able to decide to look at long-term solutions and not short-term profits.
With 30% of our children not graduating from high-school and another 30% of those barely functionally literate according to the standards of my generation, we must look at the entire fabric of our society and demand change to programs that have not solved problems but only made the situation worse. Many government programs and commissions should be eliminated. Almost 15 years ago, the Grace Commission singled out many candidates but once again, somebody's sacred cow was being gored. Well, today, we can not afford sacred cows nor any that don't give milk.
With almost 40% of our children growing up in single parent homes, the outlook for the future is not rosy. When teenagers are willing to die for an ounce of crack cocaine, something has gone haywire.
Yes, confidence in our dollar and our government is fragile. Perhaps, our leaders ought to look at what they have wrought and perhaps, try a different course before the bell tolls. For surely, the financial markets are saying, "It's past time to get your house in order!"
When overseas suppliers refuse to trade in US dollars, confidence in our country will slip and our credibility in foreign affairs, military affairs, and as a nation will be gone. It will take a long, long road to rebuild that confidence. The British are still trying some 70 years later.
But then - 'Tis Only My Opinion!
Fred Richards
March 1995
This issue of 'Tis Only My Opinion was copyrighted by Adrich Corporation in March 1995.
It is intended to provoke thinking, then dialogue among its readers. Quotation with attribution is encouraged.
'Tis Only My Opinion
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