Tax & Financial Consulting Services
Dirt-poor Pakistanis Reject American Peso!
by Eric Nolan
They come from poor regions in some of the poorest countries in the world: from rural Pakistan, India and Southeast Asia. Thousands have emigrated from these areas to Dubai in recent years to become construction, maintenance and service workers in what is one of the world’s smallest countries—yet also one its fastestgrowing economies.
They may make $200 to $300 a month. Once, that was a king’s ransom -- enough to live on and send money home to start a business, save for a home, get medical care or send children to college.
But now they’re rioting.
According to the Wall Street Journal, “thousands of expatriate construction workers walked off job sites to protest low pay and the rising cost of living. Law-enforcement officials -- who typically play down the scope of labor actions here -- have acknowledged widespread protests, isolated violence and dozens of arrests.”
The problem is their purchasing power has been plunging, as Dubai’s inflation rate hovers around 9%. Worse, remittances back home are also worth less since the dirham, Dubai’s currency, is depreciating against most currencies in the workers’ native countries.
It’s tied to the U.S. dollar.
The U.S. dollar has been falling like a lead weight not only against major currencies —- the euro, the Swiss franc, and the pound -— it has also been losing value at a breakneck pace even against the Indian and Pakistani Rupees, the Malaysian ringgit and the Thai baht.
Earlier this year, Kuwait -— the country we rescued from Saddam Hussein -— said goodbye to the dollar as it un-pegged its currency from the greenback to stem inflation.
Unfortunately, as an American, it’s not always possible to un-peg your paycheck from the dollar. But there are actions you can take to protect yourself from its downward spiral and even make double-, triple- and even four-digit gainss in the process.
But first, you have to recognize the seriousness of the situation.
How long will it be before producers of oil and other commodities decide to “de-couple” the price of their commodities from the dollar? How long before foreign central banks decide to exchange a good portion of their low-yielding U.S. Treasuries, denominated in depreciating dollars, for higher yielding assets priced in stronger currencies?
Tomorrow, the odds are high that Bernanke will cut interest rates yet again in an effort to postpone the day of reckoning for a debt-fueled and consumption-driven U.S. economy. Chances are he will cut again for many months after that.
And, all the while, the U.S. dollar will move further down the chain of “3rd-world” currencies.”
Life has its twists. Who would have thought that an immigrant laborer making $10 a day in the oil fields of Dubai would have strong, common economic interests with you and me in America, an “island unto itself,” the world’s richest country?
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