Friday, March 21, 2008

Bearing the Dollar

"What makes these proceedings so frightening is that not only is credit in crisis, but so, too, is money. There are well-founded doubts about the promises to pay money and about the nature and integrity of the dollar itself. ... Where will the Fed find these dollars? Where it always, ultimately, does. It will just have to print them, despite abundant evidence for the currency and gold markets that the world has just about all the dollar bills it cares to hold. ... Robert Rubin, chairman of the Citigroup Executive Committee, ... urged the government to exert itself on behalf of the mortgage market and the American homeowner. And who are these bankers who went sailing off the end of the Earth and thereby find it necessary to pass the cup to the gorvernment? The company of errant, if lavishly compensated, navigators includes none other than Rubin himself. ... Almost certainly, the gulf between competence and compensation on Wall Street has never been wider. ... It wouldn't be so bad if the [US] were not the issuer of the world's reserve currency. The dollar is not only America's scrip but also a store of value and a medium of exchange in Asia, South America and the Middle East. Yet--and here is the rub--the [Fed] makes monetary policy for one country only. ... Americans enjoy the inestimable privilege of consuming more than they produce and financing the difference with the currency they alone can lawfully print. ... But the Fed--its eye not on the worldwide inflation rate but on the Bear Stearns share price--is about to turn easier still ... [T]he plunging dollar may prompt a serious reexamination of worldwide monetary arrangements", James Grant (JG) at, 16 March 2008

Way to go JG. Precisely.

1 comment:

Buzz Saw said...

Soup Nazi: "No soup for you!"