Vietnamese Dong-RIP?

"Vietnam's Prime Minister Nguyen Tan Dung said last week he is confident the country won't have to devalue its currency. ... The country has been hit by a wave of strikes as it grapples with the impact of seven months of double-digit inflation, which hit an annualized rate of 25.2% in May. The stock market has collapsed as investors switch to gold. Forward currency markets are pricing a further devaluation of the 40% for the dong in the next 12 months. ... Last week, he told economists from J.P. Morgan Chase & Co. and officials from state-owned Bank for Investment and Development of Vietnam, BIDV, that the country remains financially strong. ... The upshot is that despite Mr. Dung's reassurances, Vietnam's economy could be in for another testing week after Friday's new record prices for oil--an important economic component in Vietnam, which imports all its refined oil needs. ... Economists familiar with Vietnam's Communist government say its leaders' reluctance to push up interest rates stems from their wish to ensure a steady supply of cheap money to fuel the expansion of state-owned companies and also to support Vietnam's sagging stock market, which has lost 58.5% of its value since the beginning of the year. ... [T]he State Bank of Vietnam, on Friday began enforcing long-ignored rules prohibiting foreign-exchange agents from selling dollars to Vietnamese who are scrambling to try to protect their savings", WSJ, 9 June 2008.

"Vietnam effectively devalued its currency by almost 2% Tuesday to bring official exchange rates closer to black-market rates, which have fallen sharply as Vietnamese investors buy dollars to escape soaring inflation. ... The central bank ... also increased its main interest rate for dong-denominated loans to 14% from 12% in a bid to tamp inflationary pressure", WSJ, 11 June 2008.

Amazing. Dung sounds like Hank Paulson. When Dung steps down, one can't help but wonder if there's a Goldman Sachs Managing Directorship waiting. The Vietnamese want to support their stock market so do not increase interest rates. Helicopter Ben similarly supports US banks. There's an old Polish saying: "Communist, capitalist, fascist, it all makes no difference. When the Germans and Russians get together it's bad for us". In today's context: "Communist, capitalist, fascist, banker, formerly communist, it makes no difference. When the monetary manipulators are are work, it's bad for the working class". I remember the Brits in 1967 saying they would not devalue the Pound. Sure. See my 27 September 2007 and 12 May 2008 posts.Two days after Dung's speech, Vietnam devalues the Dong by 2%. Not enough. More's coming.