In a sign of increasing desperation, some central banks are imposing currency controls in an effort to arrest the dollar’s decline. Oddly, none of them seem to be taking the most direct measure, which would be to sell their own currency. This may be due to the fact that traditionally, the job of trying to […]
Read more...Nothing like a sobering forecast to focus the mind on a Monday morning. As readers may recall, I was deeply concerned early this year about excessive leverage, asset bubbles in many different markets, and complacency about risk. But it is one thing to know that things are likely to turn out badly, quite another to […]
Read more...Oh, we are in for a wild ride. The long-anticipated and much delayed unwind of the carry trade appears to be underway, due to credit market fears. For those new to the concept, the carry trade involves borrowing where interest rates are low (typically in a cheap currency, like the yen, where interest rates are […]
Read more...A comment in the Financial Times, “The world’s currency could be a US problem,” by Krishna Guha, does a good job of setting forth various scenarios for the dollar’s future course, and discusses the implications for the US and other economies. The piece give a nice summary of the background of the problem, and concludes […]
Read more...I managed to miss this very good post, “Exchange Rates: There is a Better Way,” by Thomas Palley last week (it was also picked up by the Guardian) but since it does not appear to have been discussed in the usual suspect economics blogs, I though I would call readers’ attention to it. Before you […]
Read more...Robert Rubin spoke out against policies that weaken dollar, from the commonsense perspective that a cheap dollar lowers the US standard of living. That’s a bit simplistic, since the impact of a weak currency on citizens depends on how dependent a country is on imports, and critically, to what degree domestic goods could substitute for […]
Read more...Despite the widely-held view that the Fed will lower the Federal funds rate another 25 basis points this Halloween, some continue to argue against further reductions. We’ve taken that position here before, and will recap some of the reasons. The 50 basis point cut in September was a pre-emptive strike, based not on evidence of […]
Read more...At Vox EU, Shang-Jin Wei argues in “Don’t over-sell the benefits of a change in the Chinese exchange rate policy,” that the upside of an end to the dirty float of the yuan (or as he prefers, the renminbi), has been overstated. His analysis is elegant and persuasive, and the piece is colorfully written as […]
Read more...Whoever wrote the headline to former Treasury Secretary, now Harvard professor Larry Summers’ latest comment in the Financial Times did him a disservice. The lead-in, “How American must handle the falling dollar,” implies that Summers has a specific, hard-headed program. Instead, the piece offers a succinct and subtle analysis of what is wrong with our […]
Read more...Bloomberg reports that famed investor/fund manager Jim Rogers is moving entirely out of US $. He depicts the US as in the process of losing its reserve currency status (a theme familiar to readers) with dire consequences for the currency’s performance. From Bloomberg: Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all […]
Read more...The Financial Times reports that the G-7 meetings this weekend did not even address one of the two main issues on the agenda, the dollar, and along with the concurrent IMF meetings, featured a good deal of acrimony and disarray. Exactly what you don’t need with a crisis looming. From the Financial Times: After Friday’s […]
Read more...While the G-7 may shy away from trying to bolster the dollar, the newly bold Alan Greenspan isn’t afraid to step into the breach. From Bloomberg: Former Federal Reserve Chairman Alan Greenspan doesn’t expect a rapid decline in the dollar should nations sell more of their holdings of U.S. Treasuries, according to people attending a […]
Read more...In an odd happenstance of timing, the IMF published a report on Wednesday that declared the dollar to be overvalued. As we have noted before, this isn’t the first time they’ve come to this conclusion (they issued a similar finding at the beginning of August). That view, by the way, isn’t one that has made […]
Read more...Remember basic macroeconomics? The current account, which consists primarily of trade in goods and services, is supposed to be offset by the capital account, which is largely capital transfers but also includes the purchase or sale of “non-produced goods” like mineral rights and intellectual property. And the story of the US has been that our […]
Read more...I’ve been having so much with SIVs that I am late to this piece from Bloomberg. It describes how Paulson will face a great deal of criticism from his G-7 peers this week due to his stance on regulation (more accurately, the desirability of a lack thereof) and the dollar. The writer believes Paulson is […]
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