Sunday, March 23, 2008
The Dollar Run
"In recent years, officials in the oil-rich Persian Gulf appeared to have accepted inflation as a side effect of a booming economy. These days, it is turning into the region's biggest economic challenge. ... Last year, Dubai construction workers rioted to protest their diminishing buying power. For many expatriate laborers in the Gulf, the falling dollar is especially painful. ... But the big question for a region that imports most of its labor is: When does the Gulf's inflation rate become too costly for foreigners to stomach?", WSJ, 11 March 2008.
"Lawrence Goodman, a currency strategist at the Bank of America, says that inflation is increasingly outside the comfort zone of central banks in emerging markets. ... China's central bank governor recently noted that a stronger currency 'helps to rein in inflation'--which hit a 12-year high of 7.1% there in January. ... In late February, Hungary abolished a regime linking its currency, the forint, to the euro, to give its central bank more flexibility to tackle a growing inflation problem. ... The inflation dilemma is at its most stark in countries that peg their currencies directly to the U.S. dollar", WSJ, 11 March 2008.
"'When will the Gulf Cooperation Council pull the trigger?' analysts at BNP Paribas in London wrote in a note to clients yesterday. 'The sharp drop of the dollar, in combination with the Fed probably cutting interest rates, will increase pressure on the GCC to cancel its dollar peg,' ... Recent reports put inflation at around 14% in Qatar, 7% in Saudi Arabia and 11% in the U.A.E.", WSJ, 19 March 2008.
"Vietnam is trying to unshackle its fast-growing economy from the sliding U.S. dollar, a tactic that might stem rampant inflation but is rattling exporters and Vietnamese who have been using greenbacks as a daily currency for years. ... After considering the move for several weeks, the central bank on March 10 widened the band in which it allows the Vietnamese dong to rise or fall against the dollar in one day to 1% from 0.75% previously. ... Freeing the dong will let it strengthen against the dollar 'and will help tame the higher cost of oil and other imports,' says Vo Tri Thanh, head of the Institute of Economic Planning, a state-run advisory group. ... Tellers at branches of Military Bank, among others, have begun turning away visitors trying to exchange dollars for dong. They say banks worry the dollar's value will fall further. ... Inflation hit a 13-year high of 15.7% in February, prompting a series of stiff measures designed to suck money out of the local banking system", WSJ, 19 March 2008.
Eventually the GCC countries will pull the plug on the dollar.
Does Thanh want a job as US Treasury Secretary? I note Helicopter Ben's (HB) unconcern about the fate of Vietnamese peasants, while protecting Wall Street millonaires. Does Connie Baby think HB's actions have foreign policy implications? Does Connie Baby think at all? As the dollar run continues, HB may become interested. Look at these countries reported inflation rates. What is our's supposedly? 4%? Vietnam appears to be more capitalistic than the US! We won the Vietnam War!