Does the dollar have any enemies greater than its "defenders"?

World Bank President Bob Zoellick has done an important service with remarks he delivered Monday in which he said, "The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options." In fact, the only issue I take with his statement, delivered at the Johns Hopkins School of Advanced International Studies, is that it does not go far enough.

It has thus far been easy for most Americans to shrug off discussions of coming competition for the dollar as a reserve currency. First, of course, most Americans aren't even aware that the discussion is taking place and of those that are aware, most haven't the slightest clue how the international monetary system works -- which at least gives them something in common with most members of Congress and central bankers everywhere. (Zoellick is rightly pretty tough on the central banking community in his remarks, as well.)

Also, when Europeans or Russians starting talking about needing another currency so there is an alternative to the greenback, Americans tend to shrug it off as dollar-envy. It was not, of course, so easy to dismiss such suggestions when it came from the Chinese given their role as our principal creditor and the fact that they had more reserves than any other country in the history of mankind. But we put our hands over our ears and made "la, la" noises to drown out the discussion anyway.

Thus, whenever the issue arose, as it did again in discussions last week at the G-20 meeting, it has not had much resonance even among most members of the policy community in Washington. Many view the dollar as an immutable, unchanging fixture of the financial world ... even though recent experience has demonstrated that other than greed, there are few immutable, unchanging features of the financial world. This made it easy for the U.S. Treasury to simply mouth reassurances -- as Tim Geithner did last week -- that the dollar should remain the reserve currency without getting much questioning here at home. 

But Bob Zoellick is not a whacky, Gitane-smoking, eurocommunist with an anti-American agenda.    

He is a Republican, a Bush appointee, one of only a couple of dozen senior current or former U.S. government officials who can say they worked at Goldman Sachs, the true power center of international finance. So when he says don't take the dollar's place for granted, perhaps others in Washington will listen and start to focus more on the increasing likelihood that the growing chorus of those seeking change may well gain traction and as may the alternative currencies themselves -- be they Special Drawing Rights, the simulated money produced by the IMF for use with its members, or Chinese yuan.

Of course, Zoellick, whose remarks (which I read in "prepared for delivery" form) are typically thoughtful and also address the importance of the ascension of the G-20 and how this newly central group should take into consideration the broader rise of emerging economies, stops short of actually joining those calling for an alternative currency. It's easy to understand why, given his position.

But since none of the rest of us are president of the World Bank, we should not feel so constrained. There are plenty of good reasons why there should be one or more better alternatives to the dollar as a reserve currency than currently exist. Further, by not taking the discussion seriously we are less likely to play an effective role in the discussion about the future architecture of the system, consigning ourselves to a more reactive, sideline role.

First, there is no reason why one country should be given the responsibility or the right to play such a central role in determining international economic policies and outcomes. This is unlikely to be very persuasive here at home where most Americans first reaction is going to be, "Why the heck not? If not us, who? Don't we deserve it as the world's number one economy?" 

Given that the call for equity is not likely to be persuasive, what about basic American values like our belief in the benefits of competition. Look what has happened during this era in which we have not believed there was a real alternative to the dollar: We have behaved extraordinarily recklessly, piling on debt and practically taunting the world to find other options. It is clear, we don't have the discipline to manage the dollar properly as it is. We need the competition as much as anyone else.

Would a rapid selloff of dollars be potentially disastrous for America?  Absolutely. But, we are deluding ourselves if we don't think such alternatives already exist. Why is gold at such absurd heights and going higher? Further, there is plenty of evidence to suggest that oil and other commodities are regularly used as alternatives to currencies in what amount to forex trading strategies. In other words, markets demand such alternatives already. And any movement toward acceptance of new alternatives is likely to take a long time as investors cautiously adjust. So, we have to ask ourselves is the greater downside in embracing change or in clinging to a viewpoint that is both out of touch with emerging realities and promoting bad behaviors on our own part?

The international economic system will evolve with our cooperation or without it. Currently the biggest threat to the dollar is not those who seek alternatives but the U.S. policies that are pushing them in that direction.   It's time we engaged in this debate in a serious way, and Zoellick's remarks are a very constructive first step in that direction.

Win McNamee/Getty Images

David Rothkopf

The day of the locos...

Yes, "Morning Joe" thought the hot story out of the Venice Film Festival was the footage of an exuberant gay Italian man stripping down and begging for a kiss from George Clooney. But they missed the bigger story. Perhaps they were too dazzled by the flashbulbs or their reporter was unable to make his way through the fawning, screeching crowds of fans. But there, upstaging the canals and the pigeons of St. Marks was Hollywood's newest hunk, Hugo Chavez. And just like Clooney, he had his retinue of crazed admirers. In Chavez's case however, the heavy-breathing was coming from director Oliver Stone, who was in town to promote his latest labor of love, a valentine to Chavez called "South of the Border." 

And you thought George W. Bush was Yale's most embarrassing graduate... 

This new film -- which is not, incidentally, named after the South Carolina roadside tourist trap of the same name -- builds on Stone's unwitting reputation as a master of historical fiction. Whereas some filmmakers are known for their camera work or story-telling, Stone is best known for his inability to separate fact from fairy-tale. First, came JFK, which provided the same view of the Kennedy assassination you would get after huffing glue while watching the Zapruder film. Other fantasies made their way into his movies on Richard Nixon and George W. Bush. Appropriately, therefore, the best of all summaries of his worldview came in the description of his "single plane theory" of the 9/11 attacks as reported by the Onion. (Given Stone's track record, the fact that it is completely made up is precisely the reason it should be treated as the truth.) 

Here's an excerpt of Time's review of the film:

Every step of the way, Stone is by, and on, on the President's side. He raises no tough issues, some of which are summarized in Amnesty International's 2009 report on Venezuela: "Attacks on journalists were widespread. Human-rights defenders continued to suffer harassment. Prison conditions provoked hunger strikes in facilities across the country." Referring to the 2006 election in which Chávez won a third term, Stone tells viewers that "90% of the media was opposed to him," and yet he prevailed. "There is a lesson to be learned," Stone says. Yes: support the man in power, or your newspaper, radio station or TV network may be in jeopardy.

According to Variety, Stone said, ""You can't get a fair hearing for Chavez. It's an outrageous caricature they've drawn of him in the Western press."

Yes. Outrageous. Let's just take a few items of Chavez news from around the world that have crossed the wires in just the past couple days and draw our own conclusions, shall we?

Let's start with the mildly comic. In Belarus, Chavez met with President Alexander Lukashenko (the White Russian version of a caudillo). There, according to AFP:

Venezuelan President Hugo Chavez on Wednesday boasted of his good ties with fellow Western critic Belarus, even suggesting the two countries could become part of a Soviet-style union.

Chavez held talks in Minsk with his Belarussian counterpart Alexander Lukashenko marked by a chummy bonhomie that saw the pair also propose they travel the length and breadth of Venezuela in the near future.

"We need to create a new union of republics," Chavez told Lukashenko, according to a statement from the Belarussian presidency.

Today, in moves that are not so laughable, Chavez will meet with Russian officials where he is expected to discuss further arms sales, military cooperation and energy deals.

More ominously, today Chavez also stirred up a torrent of controversy when he accused Israel of genocide.

The question is not whether the Israelis want to exterminate the Palestinians. They're doing it openly," Chavez said in an interview with Le Figaro published on Wednesday.

The Venezuelan president, who has just completed a tour of Middle Eastern and Arab countries, brushed aside Israeli assertions that its attack on Gaza was a response to rocket fire from Islamist group Hamas which rules the coastal enclave.

"What was it if not genocide? ... The Israelis were looking for an excuse to exterminate the Palestinians," Chavez said, adding that sanctions should have been slapped on Israel.

While perhaps Stone would agree with these rants (and while he might disagree with Elliott Abrams's excellent piece in yesterday's Washington Post taking former President Jimmy Carter to task for his similarly one-sided, overstated and distorted views), his past record of using and abusing the truth like other directors do starlets suggests that he might not dig far enough into the facts to recognize that his film's hero is deeply in bed with some of the very worst of the Middle East's bad actors. 

Fortunately for the rest of us, there is the very thoughtful and profoundly disturbing column by Manhattan District Attorney Robert Morgenthau in yesterday's Wall Street Journal detailing a growing case that Chavez and the Iranians are up to the worst kind of no good in this neighborhood. (Connecting the dots between Iran, Hezbollah, Hamas, and Chavez's views is very easy when you do a little more research than Stone did.) Morgenthau writes:

Why is Hugo Chávez willing to open up his country to a foreign nation with little shared history or culture? I believe it is because his regime is bent on becoming a regional power, and is fanatical in its approach to dealing with the U.S. The diplomatic overture of President Barack Obama in shaking Mr. Chávez's hand in April at the Summit of the Americas in Trinidad and Tobago is no reason to assume the threat has diminished. In fact, with the groundwork laid years ago, we are entering a period where the fruits of the Iran-Venezuela bond will begin to ripen.

That means two of the world's most dangerous regimes, the self-described "axis of unity," will be acting together in our backyard on the development of nuclear and missile technology. And it seems that terrorist groups have found the perfect operating ground for training and planning, and financing their activities through narco-trafficking.

His theory is supported not only by the evidence outlined in his article but also by statements earlier this week that Chavez intended to provide oil to Iran in the event the world's leading powers attempt to impose an embargo on the country should it continue to pursue its nuclear weapons ambitions. The Iranian intransigence could put the U.S. on a collision course not only with Tehran but with suppliers like Chavez -- a fact which could delay his getting a star on Hollywood's walk of fame indefinitely as well as causing a real foreign policy headache for the Obama administration.

However, there are always two sides to every story (at least ... around the dinner table in my house growing up there were typically many more than that). And as dark as is the picture of Iranian-Venezuelan cooperation painted by Morgenthau there will always be someone who sees the happy Hollywood ending to such collaborations. And of course, for that we can always turn to Stone. Because according to The Guardian, Chavez's Leni Riefenstahl is currently planning as an encore "an interview film with Iranian president, Mahmoud Ahmadinejad."

Update: We just heard from Willie Geist of "Morning Joe" who noted that they did their takedown of Chavez and Stone earlier this week. I should have known that Geist, who has one of television's best B.S. detectors and, even rarer, a great sense of humor, would never have let this story slip through the cracks.