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Context of 'September 27, 2009: G20 Global Economic Balance Pledge May Be Two-Edged Sword for US Dollar'

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PNAC logo.PNAC logo. [Source: Project for the New American Century]The Project for the New American Century (PNAC), an influential neoconservative think tank, publishes a letter to President Clinton urging war against Iraq and the removal of Saddam Hussein because he is a “hazard” to “a significant portion of the world’s supply of oil.” In a foretaste of what eventually happens, the letter calls for the US to go to war alone, attacks the United Nations, and says the US should not be “crippled by a misguided insistence on unanimity in the UN Security Council.” The letter is signed by many who will later lead the 2003 Iraq war. 10 of the 18 signatories later join the Bush Administration, including Defense Secretary Donald Rumsfeld, Assistant Defense Secretary Paul Wolfowitz, Deputy Secretaries of State Richard Armitage and Robert Zoellick, Undersecretaries of State John Bolton and Paula Dobriansky, presidential adviser for the Middle East Elliott Abrams, Defense Policy Board chairman Richard Perle, and George W. Bush’s special Iraq envoy Zalmay Khalilzad. Other signatories include William Bennett, Jeffrey Bergner, Francis Fukuyama, Robert Kagan, William Kristol, Peter Rodman, William Schneider, Vin Weber, and James Woolsey. [Project for the New American Century, 1/26/1998; Sunday Herald (Glasgow), 3/16/2003; Unger, 2007, pp. 158] Clinton does heavily bomb Iraq in late 1998, but the bombing doesn’t last long and its long term effect is the break off of United Nations weapons inspections. [New York Times, 3/23/2003] The PNAC neoconservatives do not seriously expect Clinton to attack Iraq in any meaningful sense, author Craig Unger will observe in 2007. Instead, they are positioning themselves for the future. “This was a key moment,” one State Department official will recall. “The neocons were maneuvering to put this issue in play and box Clinton in. Now, they could draw a dichotomy. They could argue to their next candidate, ‘Clinton was weak. You must be strong.’” [Unger, 2007, pp. 158]

Entity Tags: Robert B. Zoellick, Vin Weber, William Kristol, William Jefferson (“Bill”) Clinton, Zalmay M. Khalilzad, William Schneider Jr., Richard Perle, William J. Bennett, Richard Armitage, Robert Kagan, Paula J. Dobriansky, Donald Rumsfeld, Craig Unger, Peter Rodman, Elliott Abrams, John R. Bolton, James Woolsey, Francis Fukuyama, Jeffrey T. Bergner, Paul Wolfowitz

Timeline Tags: Complete 911 Timeline, Events Leading to Iraq Invasion, Neoconservative Influence

Robert Zoellick, the new deputy secretary of state, testifying before a Senate Foreign Relations Committee confirmation hearing, describes the Chavez government as “a creeping authoritarianism” and says that Chavez is “do[ing] away with [his] opponents,… do[ing] away with the press,… do[ing] away with the rule of law,… [and] pack[ing] the courts.” [Fox News, 2/15/2005; US Congress, 2/15/2005]

Entity Tags: Robert B. Zoellick

Timeline Tags: US-Venezuela (1948-2005)

Deputy Secretary of State Robert Zoellick tells reporters that if China continues to pursue energy contracts with Iran it will find itself increasingly in conflict with the United States. He adds that it isn’t clear whether the force behind China’s dealmaking comes from new Chinese oil companies or some government “strategic plan.” He also asserts that China will not be able to guarantee its energy security through contracts with countries such as Iran “because you can’t lock up energy resources” in the global marketplace. [Reuters, 9/6/2005]

Entity Tags: Robert B. Zoellick

Timeline Tags: US confrontation with Iran

The Group of 20 (G20)‘s pledge to return balance to the world economy may place the US dollar in a precarious position in the long run, experts feel. Over recent weeks, the dollar has fallen 4.3 percent this quarter because of equity market weakness as well as emerging major currencies as other countries begin their recovery from the worst economic downturn since the 1930s. Some G20 meeting attendees see the dollar as susceptible to damage while questioning its stability as well as its status as the global reserve currency, although the recent weakness of the dollar is not being blamed on the weakness of the US economy. Analysts say that short-term effects to the G20 meeting of other wealthy, developing economies will be subdued; however, they say that over a longer period, bank stocks and energy prices as well as the dollar may be harmed by G20 economic balancing actions. World leaders have expressed concern that the US economy’s recovery cannot be sustained because its rebound is due to government stimulus and increased borrowing. During the meeting in Pittsburgh, the leaders agree that to balance the global economy, the US needs to save more while the massive exporter China needs to consume more to support its growth. David Gilmore, partner at FX Analytics in Essex, Connecticut, explains, “The real problem is the world needs a huge consumer and the US has been basically doing it for decades, and now it’s spent.”
US Dollar as Reserve Currency - Robert Zoellick, president of the World Bank, says the US should not take the dollar’s status as the key global reserve currency for granted now that other options are emerging. Zoellick says that shifting global economic forces reveal that it is time to prepare for growth to come from multiple global sources. Although the world’s largest economies also agree to phase out subsidies on oil and other fossil fuels over the “medium term” to combat global warming, they acknowledge that the phase-out probably will not affect energy markets in the short term. In the long term, they say, the move could weigh on energy markets, cutting fuel demand in emerging markets. As for emergency economic support, G20 leaders promise to continue support until recovery is “at hand,” thus providing some relief for foreign currencies.
Economic Rebalancing Equals Shift from Dollar as Reserve Currency? - Global economic balancing is a two-edged sword for the dollar because the currency has been damaged by extremely low interest rates and the glut of dollars in the international monetary system. But the recession already has triggered partial rebalancing as US consumers cut spending while China spends $600 billion to stimulate its economy while making itself less dependent on exports. Analysts quickly note that minus tangible steps, the pledge only serves as lip service. The analysts also say it is improbable that countries would bend to G20 rules on how to run their economies. Nonetheless, the plan would be a clear shift, signaling a move away from the dollar. Currency strategist Kevin Chau of New York’s IDEAglobal says: “In the long run, I think they want another reserve currency, whether it’s the Special Drawing Rights or the Chinese yuan. For any country’s currency to gain that kind of credibility and trust, it would take years of development.” Still, last week, the dollar fell to a new low against the euro and even dropped below the key 90 yen-per-dollar level. [Reuters, 9/27/2009]

Entity Tags: IDEAglobal, David Gilmore, World Bank, Robert B. Zoellick

Timeline Tags: US International Relations

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