Category Archives: Currencies

Debasing the Dollar Will Accelerate America’s Decline

We’ve said before that the US is in the same position as Thailand and Indonesia circa 1996, except we have the reserve currency and nukes. Some prominent commentators are making more polite observations along these lines. An article, “A rising euro threatens US dominance” in the Financial Times, by Benn Steil, director of international economics […]

Tim Duy: Fed Has Head in the Sand on Inflation and the Dollar

Tim Duy, posting at Economist’s View, is disturbed that the Fed isn’t giving much weight to rising inflation in its monetary calculus. Duy, a Fedwatcher, more than once underestimated the central bank’s interest rate cuts because it was inconceivable to him that anyone who read the data could think that repeated aggressive cuts were warranted. […]

Quelle Surprise! Markets Skeptical of G7 Efforts to Talk Up Dollar

An article in Bloomberg notes that despite the dollar bounce against the euro (the move against the yen can be characterized as noise), the Group of Seven will probably need to take “concrete steps” to support the currency. And those aren’t coming any time soon. As the piece notes, the ECB is still concerned about […]

More on the Jump in China’s Reserves

We commented the other day on the surprisingly large jump in China’s foreign currency reserves, noting that the monthly gain wa the biggest on record, when an appreciating yuan ought to put the growth in reverse (although one must note that the yuan hasn’t gained much if any ground relative to non-dollar currencies). I’m following […]

China’s Foreign Reserve Increases Accelerate Despite Yuan Appreciation

In a very bad bit of news for the US, the Los Angeles Times (hat tip Lune) reports that the Chinese policy of letting the yuan appreciate has not succeeded in reducing the country’s massive increases in foreign reserves. In fact, the situation is getting worse rather than better. Normally, when a country’s currency appreciates, […]

"Has the Moment Come to Replace the US Dollar?"

A crisp, lively piece by Kenneth Rogoff on the prospects for the US dollar does a nice job of synthesizing many of the relevant issues. Rogoff says quite bluntly that the US has gotten away with simply dreadful policies for a very long time, and even though the dollar hegemony is coming under considerable strain, […]

Hopes of Continued Dollar Rally Fading

With America’s high current account deficit not showing much improvement. the dollar’s recent rally seemed to be based on the greenback being oversold rather than improved fundamentals. Historically, countries that run current account deficits in excess of 4% of GDP suffer depreciation of the value of their currency, and the US is still well above […]

AIG: "Paulson Calls For Weaker Dollar"

A reader sent this note by AIG’s Bernard Connolly, which is surprisingly blunt for a sell-side analyst: In saying today that the housing price correction must be allowed to proceed, Paulson is in effect calling for a massively weaker dollar – athough he probably does not realise it. Of course it is true, as Paulson […]

Setser: Foreign Buys of US Assets Increasing Dislocation

Brad Setser, a source for thorough, thoughtful coverage on currencies and related topics, provides his monthly parsing of the Treasury International Capital report (this one from January, plus its survey of foreign holdings of US securities as of the end of June 2007) and does not like what he sees. Since the August TIC report, […]

Japan Says US Financial Crisis Worse Than Its Bust, Urges Government to Recapitalize Banks

The comments in the Financial Times by Yoshimi Watanabe, Japan’s financial services minister, are extraordinary. He ventured to give the US advice on its credit crunch based on Japan’s experience during its post-bubble-years banking crisis. And it’s not pretty. Why are these remarks so unusual? Consider: Most countries don’t give other countries advice on how […]

Traders Expect Intervention Following Further Dollar Decline

As told in Bloomberg, currency traders anticipate the dollar will continue its slide until our trading partners decide they’ve had enough. Of course, the very expectation of intervention may limit the dollar’s fall, at least for a while. My sources in Japan tell me that the officialdom still sees the yen as cheap, and the […]

"The euro could surpass the dollar within ten years"

When we’ve said the greenback could lose its reserve currency status to the euro, the idea has often been met with derision. Yet we see evidence that international commercial transactions are moving away from dollar-based invoicing, a sign that the tectonic plates are shifting. In a post at VoxEU, Jeff Frankel, a Serious Economist (and […]

"US losing confidence vote as investors flee"

The title of this article (provided by the page editors of the Telegraph) is a tad more sensationalistic than it need to be, but the basic observation holds: the Fed has gone so far in debasing the dollar that it is starting to see serious pushback from foreign investors. This is a serious matter. The […]

"Debt Reckoning: U.S. Receives a Margin Call"

I rarely feature Wall Street Journal articles in long form because I figure most readers will find them on their own. But the Journal’s Saturday edition isn’t as widely read, and this is an exceptionally good piece, particularly given that the Journal is not the best source on credit market reporting. The ongoing crisis seems […]

Krugman: Fed is Running Out of Tricks

Krugman, in his New York Times op-ed today, “Betting the Bank,” reminds us that the Fed is much like the Wizard of Oz: the perception of its power vastly exceeds reality. In normal times, the limited tools central bankers have at their disposal can be used to great effect, but extreme conditions reveal their impotence. […]