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March 4, 2011 12:23 PM EST
After the financial crisis, US dollar-bashing has become en vogue. These days, there are no shortages of commentators who are predicting its demise. One of them was interviewed by IBTimes here.
Marc Chandler, however, has emerged as a defender of the US dollar and 'empire,' as he calls it. Chandler is the global head of currency strategy at Brown Brothers Harriman. In late 2009, he published a book titled Making Sense of the Dollar to spell out this defense.
Chandler shared his views on the dollar in an interview with IBTimes.
Trade Deficit
First, there is the misconception that the allegedly large US trade deficit spells doom. Critics claim this proves the US no longer makes anything the world wants.
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However, Chandler said the new model of US corporations is to ‘build locally, sell locally.’ (This year, foreign affiliates of US multinationals will sell $4 trillion worth of goods).
The US government's calculation of trade balance doesn’t accurately account for this phenomenon, said Chandler.
The calculation also has other flaws that overstate the US trade deficit.
For example, when Americans buy an iPod for $299, it counts as a $150 trade deficit of the US to China, the country of the iPod’s final assembly.
However, China only earned about $4 in the entire production process.
“That’s a mis-measurement,” said Chandler.
The presence of US global commerce, therefore, is much more than what the trade deficit data suggests.
Vehicle & Reserve Currency
But the use of the US dollar isn’t just limited to the international business activities of the United States, said Chandler.
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