Investors losing confidence in dollar: PEW

Islamabad, April 22, 2011 (PPI): The Pakistan Economy Watch (PEW) has said unprecedented hike in gold and silver prices suggests that investors have lost some faith in weaker US dollar. The development also hints at lack of confidence among investors in America’s political and economic system as well as capabilities of leaders.

Such developments can be attributed to the flawed US policy of ‘spend and borrow,’ said Dr. Murtaza Mughal, President Pakistan Economy Watch (PEW).

Unhealthy habit of spending more than income has transformed US from largest lender nation to the biggest debtor.

The US government debt is set to exceed 70 per cent of GDP which will hurt its prestige, power and influence; he said adding that otherwise the status of the dollar would have never been called into question.

A country needs to have stable political and economic system to have a stable currency, said Dr. Murtaza Mughal.

He said that dependence on dollar has become increasingly dangerous while calls for another international reserve currency are yet to be translated into realty.

China is better placed to provide a reserve currency as it has largest reserves. Chinese enjoy a focused government and few economic worries as well as challenges, he suggested.

Dr. Mughal said that whole world is seeing the scale, resources and organising capacity of Beijing. China is already the world’s largest exporter and the world’s largest net creditor; by 2014 China’s economy will pass the US, in absolute size, he said

World would be at ease in the Chinese dominance as they are not assertive and not very sensitive about their ranking in world system.

Beijing is not in habit to impose their ideology, political, intellectual, economical and cultural influence on others therefore their dominance can be a good omen for world’s peace, he said.