We have had a couple of recent articles in WNP about the global financial crisis and especially the falling American dollar on world currency markets. Most do not realize just how precarious the American position is in relation to other nations.

Last Friday an article in the Wall Street Journal entitled “Security and the Falling Dollar” discussed the impact the weakened dollar has on national security. Two weeks ago the Director of National Intelligence, Michael McConnell reported to Congress that the falling dollar is impacting American security interests. “As the dollar has weakened this year, some oil producers-such as Syria, Iran, and Libya-have asked to be paid in currencies other than the dollar while others–such as Kuwait–are delinking their currency pegs to the dollar.” He added, “Continued concerns about dollar depreciation could tempt other major producers to follow suit.”

For some time we have been talking about the relative decline in of American power, especially in the economic area. This may sound off-beat since America is by far the world’s largest economy and still on top despite recent set backs. But there are signs on the horizon that this could change dramatically and quite suddenly.

This article describes the “perfect storm” brewing that could lead to dollar desertion. China and Russia do not have American interests at heart. Incoming Russian President Medvedev says the dollar is not immune to crisis of a “comprehensive global character.”

The dollar has weakened in recent years. In fact it has been in slow decline since 2001. This seems to have been part of the deliberate policy of the Bush administration and has led to fears about America’s weakened role in the world. The dollar is no longer the world’s most trusted currency. This leads to a lack of confidence in the country. Cutting interest rates and stimulating the economy with tax refunds will not correct the fundamental problems America is facing.

Here is an article by Melvin Rhodes on the dollar crisis.

Tomorrow I’ll write about the potential meltdown some see on the horizon.