Sunday, November 18, 2007

Demise of the dollar

By Libby

Call me crazy but I think I might see a trend here.

Kenneth Froot, a Harvard university professor and former consultant to the US Federal Reserve, warned yesterday: "Part of the depreciation [of the dollar] is permanent. [...]

As well as reaching its lowest level against the euro, which has been trading at more than $1.47, the dollar has also fallen to its lowest level against the Canadian dollar since 1950, sterling since 1981, and the Swiss franc since 1995. [...]

Its plight was made still worse by a jarring signal from China that it was switching to other currencies. [...]

Last month, in a humiliating turn of events, the central bank in Iraq, four years after the United States invaded, stated that it wished to diversify reserves from a reliance on dollars. [...]

Korea's central bank has urged shipbuilders to issue invoices in the local currency and take precautions against the weakened dollar, and three of the world's big oil exporters, Iran, Venezuela, and Russia, are demanding payment in euros rather than dollars. Iran insisted that Japan should make all its payments for oil in yen, rather than dollars.

And was this a mistake or an oblique warning?

In an embarrassing blunder at the meeting in Riyadh, ministers' microphones were not cut off during a key closed meeting, and Prince Al-Faisal was heard saying: "My feeling is that the mere mention that the Opec countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries. "There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for Opec."

They 'forgot' to turn off the live feed from a private meeting into the press room for 40 minutes? But not to worry. Our preznit assures us we have a strong dollar policy.

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