morbius glass

Reviews – Comics, DVD’s, Books. Finance – FX markets, Stocks, Economics. Culture

The US Fed will need to tighten, improve dollar value, or send the world into a currency crisis.

Posted by Adrian on November 19, 2007

With the American economy going into a recessionary down-slide. The Federal Reserve has cut interest rates and will continue to do so, which has caused the plummeting value of the dollar. Combined with rising costs for oil and food America could also enter into a stagflation based recession – the more Ben Bernanke and Federal Reserve continue to cut rates, the more worthless the US dollar will be.

America’s antagonists are having a field day with this, with all sorts of threats, from de-pegging their currencies from the USD, selling off USD reserves and buying up EURO to replace the USD. But can you blame them? The US economy is extremely vulnerable to the point of a systematic crash of it’s currency and financial systems. The antagonists may utilises this has a good excuse to lay the boot in, but the truth is if the USD does go under and collapses – the currency markets will be in absolute confusion, to the point of a crisis. Europe has problems, big ones; a huge housing bubble, inflation and the resonating credit crunch that has caused massive write downs and losses in their banking sector. Not to forget the UK economy slowing down sharply, which is causing their pound to lose value on the speculation the Bank of England will cut rates soon. So the EURO would be a bad choice. Asian currencies are also volatile, with both Singapore and China becoming/are economic bubbles.

There is talk of pegging the Saudi Arabian Riyal and other middle eastern currencies to a basket of more valued currencies, a possible yet problematic solution, by trying to judge value in basket currencies amounts. In worldwide volatile markets a risky feat and a dangerous one.

from Bloomberg:

“The dollar is in free fall, everyone should be worried about it,” Venezuelan President Hugo Chavez said yesterday. “The fall of the dollar is not the fall of the dollar, it’s the fall of the American empire.”


Saudi Arabia, the world’s largest oil exporter, doesn’t want the U.S. currency to “collapse,” and won’t consider the proposal, Foreign Minister Prince Saud Al-Faisal said at a meeting of oil and finance ministers that was accidentally broadcast to journalists.

“They get our oil and give us a worthless piece of paper,” said Iranian President Mahmoud Ahmadinejad yesterday. “The dollar has no economic value.”

Please also refer to A new liquidity crisis looming. Could a declining USD spark a currency crisis?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: