World Unlikely to Scrap Current Reserve System Despite Weak Dollar, Says CornerCap Investment Counsel

/PRNewswire/ -- Despite the recent credit crisis and headlines about the possible demise of the dollar as the world's dominant currency, it is unlikely that the world will scrap the current reserve system anytime soon, CornerCap Investment Counsel concluded in a recent report (go to http://www.cornercap.com/library/Newsletters/n2009fall.pdf for the complete report).

While the dollar will inevitably surrender some of its dominance, too many major players like China and OPEC have a vested interest in a financially strong U.S. to undermine the dollar's position too strongly, according to Cannon Carr, chief investment officer.

Instead, Carr anticipates an orderly transition to a post-dollar world, one that will take a decade or more, and probably with U.S. leadership.

"The dollar's position as the world's dominant currency has been key to our standard of living since World War II, and its standing plays a vital role in the U.S. recovery," Carr said. "Moving radically away from the U.S. dollar as the dominant currency would limit our return to economic growth, at a time when other countries need a healthy US to boost their own economies," he added.

However, high U.S. debt levels and deficits, when combined with a weak growth outlook, do increase the risk to a currency system tied to the dollar. With a sustained weak dollar, non-U.S. countries can find their exports expensive and their own economies influenced by poor policy choices by the US. So while other nations can tolerate a weak dollar, an irresponsibly sustained weak dollar jeopardizes their financial stability and could force them to seek more radical change to the reserve system.

What's more, without convincing economic growth (say 4% annually); the U.S. will have to balance national debt levels, deficits and government spending to manage the dollar's position. Special attention must be given to government spending (for growth, social programs, entitlements, or war), which is typically financed through taxation, borrowing, or inflation. Pushing too far in those areas would have serious ramifications for the dollar.

Carr believes the dollar's recent descent may reflect investors' increased risk tolerance rather than collapsing faith in the U.S. system. When fear reached its peak in October 2008, investors sought safety in U.S. Treasury instruments and the U.S. dollar. If fear returns, those two investment vehicles could be once again viewed as safe havens.

What does the dollar's outlook mean for investors? Pursuing radical strategies today are likely to yield sub-par investment results over time.

"We continue to believe deflationary forces may prevail for the immediate future but inflation has a higher probability in perhaps four to five years," Carr said. Predicting when that inevitable transition will occur is impossible, and CornerCap recommends diversified investment portfolios that balance the risk/reward across many uncertainties, including deflation, inflation, or a normal recovery.

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Regions Goes Back to School with Scholars & Dollars

BUSINESS WIRE --Regions Financial Corporation (NYSE: RF) announced today its creation of a financial education program, Scholars & Dollars, designed to teach students in grades 4-12 basic financial skills and concepts. The program, which represents Regions’ commitment to promote financial literacy, is being launched in conjunction with the bank’s participation in Community Service 2008, a community service initiative organized by The Financial Services Roundtable.

Regions Bank will offer the Scholars & Dollars program to schools and community groups in various markets across the 16 states the company serves in the South, Midwest and Texas. The Scholars & Dollars curriculum covers checking accounts, saving, money management, and credit and lending. Lessons may be presented by a Regions banker, an educator or other group leader. Course materials, which are available in both a high school version and a middle school version, include a Scholars & Dollars presentation guide for the class leader, flyer/poster, folder, worksheets and flashcards.

“Regions bankers work hard to bring financial skills and resources to our communities every day,” said Scott Peters, chief marketing officer for Regions. “The Scholars & Dollars program provides the opportunity to work with educators to help our children develop the financial skills they will need for the future.”

Janet Parker, Regions executive vice president, Human Resources, who is a member of the President’s Advisory Council on Financial Literacy, said, “Promoting financial literacy in our communities, particularly among young people, is one of the most important ways that we can further the Regions mission of making life better. We also are privileged to work with various organizations within our industry and our communities to help share financial knowledge with people of all ages.”

Community Service 2008 and Financial Literacy

During this summer and back-to-school season, Regions also is marking the importance of financial literacy through its national sponsorship of Community Service 2008, a program by which member companies of The Financial Services Roundtable have committed to helping their communities in hundreds of cities across the United States. As a part of this program, Regions is helping to support and increase the visibility of financial education programs through activities such as:

• Train-the-trainer financial literacy workshops – Regions associates and community volunteers are being trained to teach financial education classes using the FDIC’s Money Smart curriculum in Jacksonville, Fla.; Pensacola, Fla.; and Little Rock, Ark.
  • In Jacksonville, Regions will co-host the course with Florida’s Chief Financial Officer Alex Sink, the FDIC and The Federal Reserve Bank of Atlanta – Jacksonville branch.
  • In Pensacola, United Way of Santa Rosa County and the Federal Reserve Bank of Atlanta-New Orleans branch will join Regions, Sink and the FDIC as hosts of the event.
  • In Little Rock, Regions, along with Argenta Community Development Corporation and the FDIC, sponsored the course.
• Financial education program at Westover High School, Albany, Ga. – Regions associates volunteered weekly at the school, teaching basic financial information and encouraging students to begin saving.
• Homebuyer education classes, Memphis, Tenn. – Regions provides annual funding for financial literacy classes with United Housing, Inc.
• Money Week Houston – Regions will help to sponsor this city-wide, coordinated effort to raise awareness of financial education in Houston. As part of this event, Regions associates will sponsor a luncheon with 100 teenagers, sharing information and answering questions about banking and finance.
• Financial literacy workshops with the City of East St. Louis, Mo. – Regions associates conducted three workshops with East St. Louis city employees, at the request of the city’s mayor.
• Consumer Credit Counseling of Mobile, Ala. – Regions Mortgage associates work with the non-profit-organization to provide a homebuyer counseling class

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