Dollar drops on reserves concerns

[emad]

BBC


The US dollar has dropped against major currencies on concerns that central banks may cut the amount of dollars they hold in their foreign reserves.

Comments by South Korea's central bank at the end of last week have sparked the recent round of dollar declines.

South Korea, which has about $200bn in foreign reserves, said it plans instead to boost holdings of currencies such as the Australian and Canadian dollar.

Analysts reckon that other nations may follow suit and now ditch the dollar.
http://news.bbc.co.uk/1/hi/business/4287413.stm

[Dez]

1. 4 years of dropping dollar

and when shrub's gone, there will be another one to further the damage.

[Anarcho-Socialist]

2. 39 out of 65 nations increasing Euros. 29 out of 65 cutting back on US$s

This is very interesting from the article:

A report last month already showed that the dollar was losing its allure as a currency that offered rock-steady returns and stability.

Compiled by Central Banking Publications and sponsored by the UK's Royal Bank of Scotland, the survey found 39 nations out of 65 questioned were increasing their euro holdings, with 29 cutting back on the US dollar.

[emad]

4. markets getting ready to dump Bush/Cheney dreamticket? or

knee-jerk reaction to unfinished Enron/BCCI/Calvi biz?

[Say_What]

11. Cry for US Argentina

From January 10, 2004.

<clips>

Cry for US as it heads down the Argentinian road

The White House's feckless economic policies will carry a high price, Paul Krugman comments.

Argentina retained the confidence of international investors almost to the end of the 1990s. Analysts shrugged off its large budget and trade deficits; business-friendly, free-market policies would, they insisted, allow the country to grow out of that. But when confidence collapsed, that optimism proved foolish. Argentina, once a showpiece for the new world order, quickly became a byword for economic catastrophe.

So what? Those of us who have suggested that the irresponsibility of recent American policy may produce a similar disaster have been dismissed as shrill, even hysterical. But few would describe Robert Rubin, the legendary former US Treasury secretary, as hysterical - and Mr Rubin has formally joined the coalition of the shrill.

In a paper presented last weekend at the meeting of the American Economic Association, Rubin and his co-authors argue the US is running very large budget and trade deficits. Official projections that this deficit will decline over time are not based on "credible assumptions". Realistic projections show a huge build-up of debt over the next decade, which will accelerate once the baby boomers retire in large numbers.

All of this is conventional stuff, if anathema to US Administration apologists, who insist, in defiance of the facts, that they have a "plan" to cut the deficit in half. What's new is what Rubin and his co-authors say about the consequences. Rather than focusing on the gradual harm inflicted by deficits, they highlight the potential for catastrophe.

http://www.smh.com.au/articles/2004/01/09/1073437470446.html?from=storyrhs&oneclick=true

[Sinistrous]

3. I wish we had some credible diplomats on board to stem this trend.

If it snowballs, we are screwed.

[anarchy1999]

5. So the dollar drops again. Just exactly how is our economy thriving?

Someone please help me out here.

Dollar being ditched for "euros" and other foreign currencies?

Anyone remember exactly why we had to invade Iraq? Right after Bush was "selected" in December of 2000, Saddam switched to the Euro for oil and not the dollar. Bad move, Saddam. And now Chavez is threatening the same.

PS/Watch out for China.

Our "Super Power" position is over. What happens to all military empires? Rome, anyone? Great Britain? Spain?

[Dez]

6. We NEED another superpower

on this planet. USA has been throwing their weight around for far too long, they need to be kept in line. What goes up must come down.

[anarchy1999]

7. Can you say CHINA? Aligned with Russia, India and Iran?

Along with the EU? And who owns all our debt?

[shantipriya]

8. Dollar Drops!

The US economy is a House of Cards.The only reason the country is not bankrupt is that the US Dollar is the world's reserve currency and therfore other counntries need Dollar for international transactions.We don't manufacture anything and now even the high paying service jobs are and can be done cheaply and in some case more efficiently and of better quality overseas. So tell me, how does a person with ordinary skills and education can afford to live in mansion like houses with 3 bathrooms?!!!
In short, China, Japan and other countries are financing our extravagant but UNDESERVED lifestyle.
This has to come to an end. The question is not when but how--abruptly or gradually. If China and Japan decide to move their reserves out of US dollar overnight,the day of reckoning will arrive overnight.
We are at the mercy of China and Japan who are our bankers willing to lend to a spendthrift nation and people. At some point they, like any banker,will lose confidence in the US as a good credit and then the party will be over.

[charles_nys]

22. But .....

The US are mass consumers, that would hurt China and Japan's import business causing an economic collapse for them as well.

[peace_prevails]

9. John Walker Greenspan-Lindh

This is yet another domestic issue the Bushie crew has largely ignored, while the light shines brightly on the Iraq/Iran Nuke/Tsunami business.

Remember the 'shock and awe' that Americans without passports felt when they found they had been 'betrayed' by John Walker Lindh?

I wonder how it would play out if US Citizens started moving their dollars into foreign currency at the same rates as our coalition of the willing have started to do?

I my moving my savings and IRAs away from the dollar and into New Zealand dollars or Brazilian Reais. I'm sick of propping up this homey-da-clown's economy.

[GCP]

10. Welcome to DU!

And yes, I wonder why Greenspan didn't mention any of this when he was chirping on at congress the other day about how good the economy is.

Is he totally incompetent, or are they betting that people don't know about this?

[peace_prevails]

15. Greenspan Web of Deceit goes beyond the dollar...

Cheers for the welcome.

More on GreenlessSpam.

From the NYTimes this week.
http://www.nytimes.com/2005/02/18/opinion/18krugman.html

"On Wednesday Mr. Greenspan endorsed Social Security privatization. But there's a difference between 2001 and 2005. In 2001, Mr. Greenspan offered a convoluted, implausible justification for supporting everything the Bush administration wanted. This time, he offered no justification at all.

...By repeatedly shilling for whatever the Bush administration wants, he has betrayed the trust placed in Fed chairmen, and deserves to be treated as just another partisan hack."

Too bad that this partisan hack happens to have the power to crumble global economies when his comb-over is looking a bit untidy.

PP

[cliss]

13. Hi, peace_

Welcome to the DU:smoke: :cheers:

Very nice post. That's a good question. I believe this is already happening - Americans are moving out of dollars into other currencies. They might not so much on a cash basis, but they certainly are in their 401(k)'s and other investments.

This is going to be a self-fulfilling prophecy. The Euro is gathering momentum, and its force will only accelerate when people start to lose faith in the dollar. It's already happening.

I've jokingly said that the US should adopt the Euro as its currency, and the problem would be solved. Not funny, though.

[Say_What]

12. China and Japan holding Uncle Sam by the Cojones...

From an earlier article:

<clips>

...The last three months of 2004 saw the dollar slip by 7% against the euro, taking it to repeated all-time lows of more than $1.30.

The US is running a budget deficit of close to $500bn a year, funded largely by China and Japan buying large amounts of US government bonds.

Some economists have suggested that the two could ease their purchases, making it more difficult for the US to support its borrowing.

http://news.bbc.co.uk/1/hi/business/4200811.stm

[knitter4democracy]

14. Crap! I'm trying to open up a yarn shop this fall!

This is going to hurt me, inventory-wise. Even though I plan on having more American-made yarns than anyone else in the area (maybe the state), I will still have to carry some foreign stuff that just isn't made here anymore. That idiot president and his cronies are killing our businesses!

:argh:

[knitter4democracy]

16. Just looked up some important currencies . . .

and this is bad news. It wasn't that great to begin with, but things are worse than the last time I checked.

Thanks a lot, Bush! You've royally screwed up the country!

[peace_prevails]

17. Small Business Owners and the Dollar

There has been a lot of banter lately about large call centers and code-slanging outfits going overseas to India and China, but you bring up a good point, Knitter.

What about the 'small-business-friendly' Bush administration and their debt policies?

As the dollar weakens, import prices for american businesses go up.

It may come to a point where we'll actually have to start making things ourselves again, especially when the Chinese currency detaches itself from the USD, another pressure cooker issue.

[knitter4democracy]

23. Small Business Friendly, my . . .

Yeah, the same administration that underfunded the SBA to the point that they actually ran out of money at one point last year and couldn't give out any funds.

The same administration that's against a national health care plan that would take a huge expense off of the back of the business owner.

The same administration that pretty much screws everyone?

I'm really worried about the Chinese situation, given that many yarns are milled there. That's why I'm trying to find all the American stuff I can. The foreign yarns are just going to get too expensive, and with the price of oil going up, so will shipping.

[katsy]

19. Yarn shop?

Is there any way you can email me?

[indypaul]

18. But didn't "GFY" Cheney just

remind us that Ronald Reagan proved that
deficits don't matter. So what is the problem
Mr. Cheney?

[nodictators]

20. Bush Economic Disaster deepens: Dollar, stocks fall sharply

At 4 pm EST, the DJI was down 164 points. The other major indicies had similar 1.5% drops.

As noted above, other nations are dumping dollars big time.

From Yahoo:

-snip-
This saw the dollar fall 1.6c to a five-week low of $1.3216 against the euro, Y1.6 to Y103.83 against the yen, 1.5c to $1.9112 versus sterling, a seven-week low, and 1c to C$1.2240 against the Canadian dollar.

The dollar also fell against Asian currencies, slipping Won20 to a seven-year low of Won1,005.8 against the South Korean currency and 9c to T$31.29 and against the Taiwan dollar, a four-year low, with sizeable cross-border inflows into Asian equity markets further strengthening Far Eastern currencies.

http://story.news.yahoo.com/news?tmpl=story&cid=1106&ncid=1106&e=2&u=/ft/20050222/bs_ft/0d4e4aa884c511d9a17200000e2511c8

[Coastie for Truth]

21. Talking About Defaulting On US Bonds In Social Security Trust Fund

is not helping the situation. Nor are massive projected deficits (thanks to our elective wars of preemption and our tax cuts for the wealthiest 2%).

[despairing optimist]

24. Dollar drops? Did GannonGuckert switch to euros? OMG!