Comments on: The Economist and Brad Setser on the Dollar http://www.nakedcapitalism.com/2007/12/economist-and-brad-setser-on-dollar.html Sun, 22 Nov 2009 04:39:16 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Mike http://www.nakedcapitalism.com/2007/12/economist-and-brad-setser-on-dollar.html#comment-2095 Mike Mon, 03 Dec 2007 16:51:00 +0000 http://www.nakedcapitalism.com/2007/12/the-economist-and-brad-setser-on-the-dollar/#comment-2095 All eyes are on the credit/derivatives seizure. One would expect dollar appreciation against American assets as indebted dollar-based institutions struggle to regain solvency.<br/><br/>But, there is another reality of plentiful dollars amongst the GCC (Kuwait, Saudi, UAR, Oman, etc). These countries, except Kuwait, have currencies pegged to the USD. And their economies are as stressed by inflation as American credit markets are stressed by seizure.<br/><br/>The fate of these pegs are as important as the yuan/yen/euro/seizure stories.<br/><br/>http://www.arabtimesonline.com/client/pagesdetails.asp?nid=8860&ccid=11<br/><br/>Depegging has already begun with some oil exporting countries. I think it will continue. <br/><br/>The question is whether an appearance of stability can be maintained. All eyes are on the credit/derivatives seizure. One would expect dollar appreciation against American assets as indebted dollar-based institutions struggle to regain solvency.

But, there is another reality of plentiful dollars amongst the GCC (Kuwait, Saudi, UAR, Oman, etc). These countries, except Kuwait, have currencies pegged to the USD. And their economies are as stressed by inflation as American credit markets are stressed by seizure.

The fate of these pegs are as important as the yuan/yen/euro/seizure stories.

http://www.arabtimesonline.com/client/pagesdetails.asp?nid=8860&ccid=11

Depegging has already begun with some oil exporting countries. I think it will continue.

The question is whether an appearance of stability can be maintained.

]]>