Tuesday, July 07, 2009

Leave the Dollar Out of Trade? India Joins Japan and China

Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said in a July 3 interview that he is urging his nation to diversify its foreign holdings away from the dollar.
The challenge to the dollar, a linchpin of world finance and trade since 1945, underlines the shift in relative economic power toward emerging markets and away from the developed nations that spawned the global crisis...Russia, India Question Dollar Reliance..., Mark Deen & Simon Kennedy, Bloomberg News, July 6, 2009

A major diplomatic effort from the State Department in the last ten years was to turn India away from China and Russia, regarded as a huge and peaceful success story. One of the consequences of the first five and a half months of the new administration's fiscal policies may undo a decade's hard work and turn India's perception of, and relationship to, the United States upside down.

A classic blunder for an inexperienced administration is to be blind to context, to fail to see the overall effect of a given policy action. It's also a standard tactic of the Left to disregard the consequences of their actions, a perfect match between ideology and a White House proceeding with almost breathtaking ignorance abroad. When all that matters is power, who cares if it wrecks international initiatives? In this instance, however, the international initiative was to help counter the rising probability that Pakistan will turn into an outpost of Islamic fascism. India wanted this relationship too, maybe even more for self-protection, but if it can't afford it and has to turn north again, you'll know who to thank. A lesson the White House needs to learn is that in international politics, economic well-being comes before security issues. People can't fight if they haven't eaten.


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