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dollarISLAMABAD: The Pakistan Economy Watch (PEW) has said that the unprecedented hike in prices of gold and silver suggests that investors have lost faith in the weaker dollar.

The development also hints at the lack of confidence among investors in the political and economic system of the US as well as capabilities of its leaders.

Such developments can be attributed to the flawed US policy of “spend and borrow”, said Dr. Murtaza Mughal, President PEW.

The habit of spending more than the income earned has transformed the US from the largest lender nation to the biggest debtor.

The US government debt is set to exceed 70 percent of GDP which will hurt its prestige, power and influence, he said adding that otherwise the status of the dollar would have never changed.

A country needs to have a strong political and economic system to have a stable currency, said Dr Murtaza Mughal.

He said that the dependence on dollar has become increasingly dangerous while calls for another international reserve currency are yet to be translated into realty.

China is better placed to provide a reserve currency as it has the largest reserves. Chinese enjoy a focused government and few economic worries as well as challenges, he suggested.

Dr. Mughal said that the whole world is seeing the scale, resources and organising capacity of Beijing. China is already the world’s largest exporter and net creditor. It is estimated that by 2014 China’s economy will surpass the US in absolute size, he said

Chinese dominance would be better for the world as China is not assertive and not sensitive about its ranking in the world.

Beijing is not in the habit to impose its ideology, political, intellectual, economic and cultural influence on others, therefore, its dominance can be a good omen for world peace, he said.

Copyright PPI (Pakistan Press International), 2011

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