The Dollar Crisis
A Blueprint To Help Rebuild The American Dream

By Ross Perot and U.S. Senator Paul Simon

THE SUMMIT PUBLISHING GROUP

Copyright © 1996 Ross Perot and Senator Paul Simon.All rights reserved.
ISBN: 1-56530-217-6



Chapter One


The Zloty and the American Dream

Not too many centuries ago, people purchasedcommodities primarily with othercommodities. For example, a bottle of wineMight have bought a bushel of wheat. A personwho knew how to make a table and chairs outof a log could barter those items for food or clothing.Nations traded with other nations in much thesame way. Gradually, gold, diamonds, and otherprecious stones and rare metals became a moreconvenient way of acquiring goods from othernations or from merchants in faraway ports.

Eventually, national currencies were developed.Coins were used early on, and later paper becameaccepted. Today, a check is a form of currency.When you write the check, you do it with theunderstanding that your "faith and credit" back it.A system based on trust works well as long aseveryone is honest. However, people quickly loseconfidence in someone who writes checks that arenot worth any more than the paper on which theyare printed. Eventually, they will refuse to deal withthose who don't make good on their IOUs.

The same is true on a global basis. Nations issuepaper currency with different names: dollar, yen,deutsche mark, pound, franc, lire, and many others.Those pieces of paper, like your check, carrythe implied promise that they have the "full faithand credit" of a particular country. As with a badcheck, people and nations gradually lose confidencein any country whose currency does notmaintain its value.

Most trade within a nation and between nationsis done with currency, or it is at least designated incurrency terms. In America, farmers sell their foodproducts for dollars, as do car dealers, pharmacists,and computer software developers. When trade isconducted with another nation, it is done with theexplicit understanding that the purchaser will payin a specified currency. Sometimes there is anagreement that if the designated currency depreciatesin value between the date the contract issigned and the date of payment, an adjustment willbe made.

A currency is described as stable when it isdependable, constant, and trustworthy. Stablecurrencies help facilitate world trade. Unstablecurrencies hinder trade between countries byintroducing uncertainty into a transaction that isprobably already complicated by its internationalsetting. Business transactions across national borderstotal almost a trillion dollars a day, andbecause of the stability of the currencies used, thosetransactions can be consummated in seconds.

But the process has its complexities. Currencyvalue fluctuations can have short-term consequencesfor the people of a nation whose currencyhas changed. As a minor example, a magazine promotionon television recently advertised that asubscription for one year was available for eighteendollars to U.S. viewers but twenty-three dollars(Canadian) for Canadian viewers. The samesubscription had been available to Canadian viewersfor twenty-one dollars (Canadian) a few yearsearlier, even while the price was then eighteen dollars(U.S.). Because Canada's dollar has depreciatedmore rapidly than the U.S. dollar, that magazinesubscription price is a small penalty Canadiansmust pay for the fiscal policies of their government.On a larger scale, consider the adverse implicationsfor a country when a company hesitates to proceedwith a project because of the uncertainty caused byexcessive currency fluctuations. Jobs that mighthave been brought to a country can easily go toanother nation with a more stable currency simplybecause the investment risk is lower in the countrywith the stable currency.

As in the example above, the value of the U.S. dollar--likethe stock market--goes up and down eachday relative to other currencies. Sometimes there isan upward swing and sometimes a downwardtrend, but the long-term tendency has been down.

That is illustrated, unfortunately, by the fact thatconfidence in U.S. currency--the dollar--hasslipped over the years, and that lack of faithadversely affects the quality of life for mostAmericans. To say that "A dollar doesn't go as far asit used to," may be a cliche, but it is reality for everyone of us. Fortunately, just as imprudent policies ofthe past have caused the dollar to drop in value,wiser policies can improve the situation.

This point is dramatically exemplified by therecent situation in Poland, whose currency is thezloty. During the Communist era in that country, itwas almost worthless. Americans visiting Polandfound upon their return to the United States thatbanks would not convert the Polish currency intodollars. Even businesses at the Warsaw airportwould not accept payment for anything in zlotys.They accepted dollars, deutsche marks, or otherrelatively stable currencies, but not their own.Since the demise of the Polish Communist governmentin 1989, sensible fiscal and monetary policieshave been followed. Today, the zloty is a respectedcurrency. This recognition has helped bring significantinvestment to Poland and a visible rise in thestandard of living of many of her people.

The daily fluctuations in currency values mayseem almost irrelevant to some of us. And the factthat the numbers reflecting those values are buriedin small print deep in newspapers only tends tominimize their impo-rtance. Nothing could be fartherfrom the truth, however. Those vital statisticsreflect major shifts of confidence and, therefore,value among currencies of the world. In turn, thosechanges of value determine how much the citizensof those countries pay for everything from electricity,to food, to cars, to clothes. In other words, fluctuationsin those numbers foretell substantialadjustments in the lives of people all over the globe.

Speaking of fluctuations, do you rememberwhen people around the world frequently used thephrase, "the almighty dollar"? Those words are notused as often as they once were, are they? And if wedo not take decisive action soon, we will hear themeven less frequently as the stability of, and confidencein, the United States dollar erodes.

Americans want to feel financially secure. It is alegitimate part of the American dream. But we cannothave it with an unstable dollar, and we cannothave a stable dollar unless we make some changes.