Obama Loan Sharking Around in Asia

President Obama's maiden voyage to Asia has all the looks of a come-to-banker meeting, says William Pesek - except the reality dawning on Asia is that Obama can't promise that the U.S. can repay its debt and keep the dollar from crashing. Let's hope they call in the loan in a smooth way.

Nov. 12 (Bloomberg) -- Global recession. Free trade. Security. Climate change. Afghanistan. Iraq. North Korea.

Barack Obama sure has lots to discuss on his maiden voyage to Asia as U.S. president. Yet all this is just conversation compared with the real issue on Asia’s mind: a wobbly dollar that’s putting the region’s money at risk.

Think of this trip as a visit to America’s banker, and an unpleasant one. Asia wants assurances that the U.S. can repay its fast-mounting debt and prevent a dollar crash. The reality dawning on Asia is that Obama can’t offer them such a pledge -- not with U.S. borrowing so out of control.

Dollar anxiety is reaching a fever pitch. It’s sucking the life out of key issues pertaining to the future, and it’s time to do something about it. Asia needs a plan to scrap its dollar addiction, and it can start in Singapore this week.

Let’s dispense with the fiction that the annual Asia- Pacific Economic Cooperation group summit will achieve much. Trade frictions are rising, the U.S. is mired in recession, Japan is experiencing deflation and big pacts on climate change or denuclearizing North Korea are non-starters.

The best way to use this summit is to discuss an exit strategy. Not an end to government stimulus efforts, but a dismantling of Bretton Woods II. The system of tying currencies to the dollar that emerged after the crises of 1997 and 1998 is doing more harm than good.

Currency Risk

In 2009, Asia’s currency-reserve arms race is mostly about risk. The wisdom of amassing huge dollar stockpiles was once clear enough. It was about walling off economies in times of turmoil and not having to go hat-in-hand to the International Monetary Fund. Now Asia is trapped.

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