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| Europe |
| Authorities lose patience with collapsing dollar |
| 2008-04-20 |
| Jean-Claude Juncker, the EU's 'Mr Euro', has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds. Momentum traders have blithely ignored last week's accord by the G7 powers, which described "sharp fluctuations in major currencies" as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday. "I don't have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting," he said. Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising "protectionism" in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar. World central banks last intervened eight years ago - with mixed success - buying euros in September 2000 to support the fledgling currency through its worst crisis. David Woo, currency chief at Barclays Capital, said the Europeans and Americans are talking past each other. Whatever the G7 wording, Washington is happy to watch the dollar slide. "They are not going to worry unless there is a knock-on effect on US equity or bond prices. So far that hasn't happened. There are no signs that the dollar decline has turned disorderly," he said. European industry has managed to live with the high euro so far, but the damage of major currency shifts can take years to surface. "The moment will come where the exchange rate level will start to cause serious harm to the European economy," said Mr Juncker. Louis Gallois, head of the Airbus group EADS, said his company is already taking dramatic steps to shift plant to the dollar-zone. "The euro at its current level is asphyxiating a large part of European industry by shaving export margins," he said. The European Central Bank revealed in its monthly report that foreign direct investment (FDI) into the euro zone has contracted by €269bn over the last two years. Foreigners are gradually winding down operations. This will have powerful long-term effects. George Soros, the hedge fund baron who "broke" Europe's exchange system in the early 1990s, said yesterday that the euro could never anchor of the global system. "I don't think the euro can replace the dollar as the main world currency. The euro is not a truly attractive alternative," he said. Pence per euro Mr Soros said the dollar would reclaim its crown eventually, but for now the financial crisis is leading to a flight from all paper currencies, causing a dash for gold, silver, and oil futures. Otmar Issing, the ECB's former 'High Priest', said the single currency had started well but could face a "disastrous outcome" if the eurozone failed to embrace a flexible market system. "The 'single-size' monetary policy would simply not fit at all. In such a scenario, the single currency would risk straining cohesion " he warned in a new book, 'The Euro'. This is already occurring. North and South have diverged further. While Germany and Holland have prospered under the strong euro, most of southern Europe and Ireland is in trouble. Current account deficits have reached 9.2pc of GDP in Spain and may touch 15pc in Greece. The European Commission's economists fear that the loss of competitiveness against Germany over the last decade may have passed the point of no return. At best, these countries face years of belt-tightening as their property booms deflate. Dollars per euro Silvio Berlusconi, Italy's newly elected premier, has called for a change in the ECB's mandate, proposing a dual mission akin to the US Federal Reserve's mandate to promote growth as well as fighting inflation. He has the support of France's Nicolas Sarkozy. A key reason for the 30pc rise in the euro agasint the dollar over the last two years has been the move by Asia central banks and Mid-East wealth funds to parking huge sums of newly acquired wealth in European bonds as an alternative to the dollar. BNP Paribas said Asian surplus countries and commodity exporters have accumulated $1,160bn in reserves over the last year alone. US Treasury data shows that only 19pc of this was invested in dollar assets. This is a sharp break with past practice. A large chunk of the money was invested in euro-zone securities. The question is whether China, Saudi Arabia, and others, have now reached euro saturation. |
| Posted by:tipper |
| #11 GLOBALRESEARCH > US DOLLAR MELTDOWN BEGINS AS CHINA DUMPS THE CURRENCY, $1.4Trilyuuhn's worth into more preferred world currencies e.g. Euro, as CHINA reportedly favors STRONG CURRENCIES??? OTOH, RUMORMILLNEWS Poster > JEFF RENSE Radio SHow - Rense + Guest Pert opined that AMERS SHOULD PREPARE NOW FOR A VARIETY/NUMBER OF COMING, SIMULTANEOUS OR NEAR-SIMUL OCCURRING SEVERE NATIONAL + GLOBAL CRISES, including US-IRAN WAR after August??? |
| Posted by: JosephMendiola 2008-04-20 22:01 |
| #10 Actually it's more complicated than that. The fed doesn't "really" set interest rates. I think Ben B is worried because his theories aren't working. |
| Posted by: Bright Pebbles 2008-04-20 19:33 |
| #9 "How to stop the dollar falling? Easy raise interest rates. " Bravo, BP. I have been advocating this for a very long time. |
| Posted by: no mo uro 2008-04-20 19:22 |
| #8 There's that term again - "Eurozone". Is "EUROPE" is no longer pertinent or PCorrect vv "the -ZONES"??? NICE OF THE POLITICOS AND OFFICIOS, etc. TO LET THE MAINSTREAM = ORDINARY CITIZENRY KNOW THE WOT > WAR FOR GLOBAL ZONES. CLEARLY SUCH COURAGE, OR LACK OF SAME, MUST BE REWARDED AT GOVT = NWO EXPENSE! *FARK.com > ...WHAT CAN POSSIBLY GO WRONG??? |
| Posted by: JosephMendiola 2008-04-20 18:40 |
| #7 BP's dead on. I just got 9.50% P.A. on an FDIC-insured CD. Reminded me of when Jimmuh was POTUS. Bad, bad memory... |
| Posted by: Thaimble Scourge of the Pixies4707 2008-04-20 18:29 |
| #6 They bitched in the 80s the $ was too high, they bitch when it's high, they bitch when it's low.... They wanted to be kingpin - be careful what you wish for...... |
| Posted by: anonymous2u 2008-04-20 18:28 |
| #5 How to stop the dollar falling? Easy raise interest rates. Higher interest rates are happening anyway. |
| Posted by: Bright Pebbles 2008-04-20 16:31 |
| #4 He hates the dollar, he loves the dollar, I wish Soros would make up his mind. He must have taken some Forex lots on the dollar if he is talking it up now. |
| Posted by: bigjim-ky 2008-04-20 10:15 |
| #3 If it hurts the EUnicks, it can't be ALL bad. |
| Posted by: bigjim-ky 2008-04-20 07:59 |
| #2 correction: $50 US Dollars, 'Soros' the self described "Humanitarian of the World" will make billions off this latest |
| Posted by: RD 2008-04-20 05:38 |
| #1 George Soros, the hedge fund baron who "broke" Europe's exchange system in the early 1990s, said yesterday that the euro could never anchor of the global system. "I don't think the euro can replace the dollar as the main world currency. The euro is not a truly attractive alternative," he said. Pence per euro Mr Soros said the dollar would reclaim its crown eventually, but for now the financial crisis is leading to a flight from all paper currencies, causing a dash for gold, silver, and oil futures. $50 US Dollars, 'Soros' the self described "Humanitarian of the World" will make billions off this latest Monitory 'crisis'. Apr 10, 2008 Soros: Credit Crisis Losses to Top $1Trillion [Euros? or Dollars?] |
| Posted by: RD 2008-04-20 05:36 |