Fears of dollar collapse as Saudis take fright

[Lucky]

Just to make things a little more interesting

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.

The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.

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For Saudi Arabia, the dollar peg has clearly become a liability. Inflation has risen to 4pc and the M3 broad money supply is surging at 22pc.

The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.

Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.

 

[tech/a]

Read on there is more.

"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.

Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.

Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.

The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.

"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.

 

[numbercruncher]

Theres gold in them thar hills ....



Seriously ASF forum users should be running the US economy, cant do any worse than the current muppets.

 

[Lucky]

I can't help but think that this scenario is too perfect, too contrived, that this whole thing has been purposely manufactured.

 

[numbercruncher]

I can't help but think that this scenario is too perfect, too contrived, that this whole thing has been purposely manufactured.

Me Too Lucky, I now second guess every single thing the US does.

Its always seems there is an agenda, so many possibilities, maybe the collapse is engineered to usher in the one world currency ?

So many things to ponder.

 

[Lucky]

the north american union and the amero spring to mind. can you imagine?

 

[numbercruncher]

lol i like this line from the boys at daily reckoning.

--Judging by the stock market, you’d think the worst is over. We suggest you keep an open mind. The Fed’s move is a giant attempt to change the subject, like a stupid party trick someone makes to distract you from the folks puking in the bushes. It’s worked for now.

 

[KIWIKARLOS]

The Us owns europe and has done since end of WW2 Germany, poland, England and now france. India is now a US partner. The US is essentially taxing the rest of the world by having the benchmark US dollar market. Countries have to have US dollars to buy oil and since the US money is worth less they can buy less. Not to mention the huge number of US bases in europe, im sure they are all getting paid US monopoly money for the leasing of these sites and the rents getting cheaper by the day now.

With the huge "arms aid packages" the US recently gave to the Gulf states do you really think they will start selling oil in Euros With 25% or more oil coming from Iraq do you think the US will sell its (sorry Iraqi oil in Euros.

When you think about it if the US currency experiences huge inflation the buying power and therefor the political power of China decreases at pretty much the same rate. Since the US is their biggest market they also deal a blow to their export income and make the US more competitive.

If China doesn't revalue its yuan and up its rates its going to see massive inflation and equity bubbles. If Chinas Yuan increases dramatically and the US dollar decreases the trade imbalances that have caused so many problems will be evened out.

I believe this is what the US is doing because they know that the WTO can't do jack to address the problems.

 

[KIWIKARLOS]

Also China and Russia have been increasing spying on the US not to mention the escalation of old habits between all three countries. Could be the equivalent of an economic cold war and right now Europe (US buddy) is on top

 

[KIWIKARLOS]

sorry guys one last comment

I here alot of US bashing, saying how untrustworthy they are, how much of a police state they have turned into. The fact that their economic problems are creating chaos for everyone.

Nobody looks at the good the US does or compare it to what the other major powers are doing. For example

1. Iraq: Lets be frank its a proxy war with Iran and a war for control of oil everyone knows that. Look at Russia and China they have been fighting wars in Kosovo and killing tibetan people for ages. Not to mention quelling riots by making people disappear.

2. Human rights: Has anyone travelled to russia? they are not at all visitor friendly place. China harvests organs from Falun Gong members with estimates between 200k to 1 M people in gaol from Falun gong alone.

3. Environment: i saw a list of the top ten most poltued sites in the world. I think russia and china combined had about 8 of these.

4. A kid gets hit with a taser at a speach. In china they run you over with a tank or shoot you for speaking against any party member. Prob the same in Russia.

My point i feel people take forgranted the role the US plays in creating a relativly peaceful (when compared to history for the last few hundred years) prosporous world. I for one would choose the US side over the other options any day.

 

[numbercruncher]

I choose team USA as well.

But they need huge change, new leadership, new direction, new ideas - a complete overhaul.


I wouldnt be surprised if this little social experiment in Globalisation is eventually dumped and we see an even bigger surge in nationalisation.

But who knows just seems to be a perpetual world wide battle between nations to reign supreme.

 

[explod]

I can't help but think that this scenario is too perfect, too contrived, that this whole thing has been purposely manufactured.

Of course. There was a very good thread on ASF a few months ago on banks. It is the plan of banks to make money, to do that they take it off the sheeple in any way they can. There a more experienced players on the forrum who I hope may be able to offer an explanation, but reference bact to that thread will do it.

 

[numbercruncher]

Lots of internet chatter saying things like "The U.S. dollar is facing imminent collapse in the face of an unsustainable debt"

Pretty scary thought really


Surely US denominated investments via the carry trade are going to start to unwind now ?

 

[karmatik]

Of course. There was a very good thread on ASF a few months ago on banks. It is the plan of banks to make money, to do that they take it off the sheeple in any way they can. There a more experienced players on the forrum who I hope may be able to offer an explanation, but reference bact to that thread will do it.

I think this may be the thread you are referring to:

https://www.aussiestockforums.com/forums/showthread.php?t=7108&highlight=nano

 

[chops_a_must]

Lots of internet chatter saying things like "The U.S. dollar is facing imminent collapse in the face of an unsustainable debt"

Pretty scary thought really


Surely US denominated investments via the carry trade are going to start to unwind now ?

Could be a very interesting night ahead...

 

[wayneL]

sorry guys one last comment

I here alot of US bashing, saying how untrustworthy they are, how much of a police state they have turned into. The fact that their economic problems are creating chaos for everyone.

Nobody looks at the good the US does or compare it to what the other major powers are doing. For example

1. Iraq: Lets be frank its a proxy war with Iran and a war for control of oil everyone knows that. Look at Russia and China they have been fighting wars in Kosovo and killing tibetan people for ages. Not to mention quelling riots by making people disappear.

2. Human rights: Has anyone travelled to russia? they are not at all visitor friendly place. China harvests organs from Falun Gong members with estimates between 200k to 1 M people in gaol from Falun gong alone.

3. Environment: i saw a list of the top ten most poltued sites in the world. I think russia and china combined had about 8 of these.

4. A kid gets hit with a taser at a speach. In china they run you over with a tank or shoot you for speaking against any party member. Prob the same in Russia.

My point i feel people take forgranted the role the US plays in creating a relativly peaceful (when compared to history for the last few hundred years) prosporous world. I for one would choose the US side over the other options any day.

There are two things you are not seeing.

1/ America purports to stand for liberty, freedom, justice etc. What they say and what they are increasingly doing is strongly divergent. I can point out a long list of human rights abuses perpetrated by the US, both inside and more particularly outside its boundaries. It is a hypocrite. Guantanamo Bay is but one small example.

2/ We in trading are supposed to notice trends, yet you fail to see the trend with the US progressively removing freedoms and contravening its own constitution. A simple extrapolation of this trend will see them no different to Russia & China if that continues.

I am from there, I still have family there. I can tell you that the reality in the US is far different to the propaganda you hear.

I don't believe all is lost. There are still great people in the US and in general they have been placated by an illusion of prosperity created by debt. At the moment folks believe they have too much to lose if they arc up. But if that changes, watch out, there will fireworks.

Dollar Doom and current problems may be a catalyst, but it may take some more time.