Saturday, November 6, 2010

"As the dollar falls...."

Financial news forwards from Peter Myer's elist:

"Two weeks ago Brazil moved to deter speculators from pushing up its currency, doubling the tax on foreign investment in its government bonds. Last week Thailand acted on similar lines by no longer exempting foreign investors from paying a tax on its bonds, with the Thai finance minister warning of more to come. As the dollar falls and developing nations see speculators push up their exchange rates, other countries are also discussing more stringent restrictions. A damaging age of capital controls seems likely.

"Indeed, moves by speculators purchasing assets and taking currency positions in China, Brazil and much of Asia now threaten to make this new era a self-fulfilling prophecy. Such speculative inflows contribute little to capital formation or employment. But they do price exporters out of foreign markets, and can be suddenly reversed if speculators pull out, disrupting trade patterns.

"With the likelihood of further falls in the dollar, central banks in developing countries face a capital loss if they try to stabilise exchange rates by buying dollar-denominated assets – as the Bank of Japan did when it recently bought $60bn of dollar securities to hold down the yen's rise. These modest acts set rates through the open market, but their cost is now threatening to drive these economies towards more formal capital controls. ..." Capital controls will follow the weak dollar, by Michael Hudson – Financial Times, 10/19/2010,

"The dollar will embark on a sharp decline over the next 12 months, Goldman Sachs forecast on Wednesday, as policy makers in Washington look poised to press the trigger on another round of printing money." Dollar set for sharp decline, Goldman forecasts, By Richard Blackden, 07 Oct 2010,
GYEONGJU, South Korea (Kyodo) The United States and South Korea jointly proposed Friday that the Group of 20 leading economies cap their current account surpluses or deficits at 4 percent of gross domestic product as part of efforts to rebalance the global economy, Finance Minister Yoshihiko Noda said. Saturday, Oct. 23, 2010, Japan Times, G20 urged to cap deficits, surpluses at 4% of GDP,

"(Reuters) - Ultra-loose monetary policies by the Federal Reserve and the European Central Bank are throwing the world into "chaos" rather than helping the global economic recovery, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday." Fed, ECB throwing world into chaos: Stiglitz,
"What is reversing trends that seemed irreversible for the past 65 years is the manner in which the United States has dealt with its bad-debt crisis. The Federal Reserve and Treasury are seeking to inflate the economy out of debt with an explosion of bank liquidity and credit – which means yet more debt. This is occurring largely at other countries' expense, in a way that is flooding the global economy with electronic "keyboard" bank credit while the U.S. balance-of-payments deficit widens and U.S. official debt soars beyond any foreseeable means to pay. The dollar's exchange rate is plunging, and U.S. money managers themselves are leading a capital flight out of the domestic economy to buy up foreign currencies and bonds, gold and other raw materials, stocks and entire companies with cheap dollar credit." U.S. "Quantitative Easing" is Fracturing the Global Economy, by Prof Michael Hudson, Global Research, November 1, 2010

No comments: