Strong dollar, weak dollar and migration threat - LEVENT YILMAZ

Strong dollar, weak dollar and migration threat

Speaking at the Davos Summit in January 2018, U.S. Secretary of Treasury Steven Mnuchin said that a weaker dollar benefited U.S. trade balances, and immediately after this statement the dollar index dropped to 88.76, the lowest in three years. U.S. President Donald Trump, who intervened right after this statement, said Mnuchin's words in favor of a weak dollar had been twisted. Speaking at Davos, Trump said, "The dollar is going to get stronger and stronger, and ultimately I want to see a stronger dollar."

Then, toward the end of July 2018, Trump tweeted that a strong dollar limits the U.S.'s competitiveness: "China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge."

I have no intention of personalizing the matter. The U.S. is, after all, a country that takes pride in its institutions and has achieved its current power thanks to the systematic functioning of those institutions. However, at the point we have reached today, the harsh responses and ambiguous policies in almost every area, not only on a dollar basis, are increasingly escalating tensions worldwide and hence, tipping several balances of countries, primarily their economic stability.

Using the dollar as a weapon

Money is, beyond anything else, a means of exchange. It is, perhaps, one of the most important inventions that make life easier. Just imagine trying to exchange wheat for a kilogram of tomatoes in this day and age. However, presently, we see the dollar being used more as a weapon than a means of exchange in the global finance system. Surely money is also a store of value. American economist Fredric Mishkin says, "Money also functions as a store of value; it is a repository of purchasing power over time. A store of value is used to save purchasing power from the time income is received until the time it is spent."

Nowadays, as a result of the high dollarization that has emerged with the U.S. becoming the sovereign power after the Bretton Woods era, the petro-dollar mechanism and World War II, people, and sometimes governments, prefer the "dollar" as a store of value. At an age which we can particularly classify as a monopolar world, we see the U.S. administration today turning the dollar, which is almost the common global currency and plays a facilitating role in global trade, into a weapon that targets governments, their leaders, and countries' financial stability.

Financial destabilization

We define financial stability as the durability of the economy against unexpected situations that may unbalance the financial system. Financial stabilization is of great significance in terms of a country's social welfare. What's more, if the country in question is in the Middle East, this is related not only to social welfare, but global welfare is also directly connected to both regional and global financial stability. In this sense, the contradicting statements made by the U.S. administration in very short-term time frames are increasing the reaction to the latest U.S. policies and decreasing the trust in the dollar by the day.

The great migration threat awaiting the West

The fact that there are tens of millions of people ready to migrate from a region - of which we also border - that has been long struggling with clashes, war and economic problems, to countries where they can live in better conditions and, as a matter of fact, at least stay alive, should not be overlooked. For example, if you take a look at Afghanistan, Iran, Syria, Iraq, and Armenia, as well as some Turkic Republics, you will see that such a serious potential actually exists.

We may be faced with a process that will lift the natural barriers preventing such a massive wave of migration, or tens of millions of people starting a great wave of migration toward the West as a result of policies that will negatively impact its staying in power.

It is very clear that once the countries in the region open their borders and doors, this will turn into a mass migration with no go backs and will shift all political balances. In this sense, it needs to be reiterated that one must think over and over again when imposing sanctions or embargoes and providing arms to terrorist organizations that threaten the security of one's allies.


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