Defending the Truth

not sure if i post this here but well i went to canada over the weekend and their dollar is worth more at some places i went to change money. i can't believe that it has finally come where canadian money is worth more.

on the border security issue i dont' nderstand why detroit tunnel and bridge people are NOT checked before they drive threw it to the other side same as in canada . don't u think it would b safer if cars were made to go threw a checkpoint before getting inside the tunnel or bridge. i hope the next president will address this issue because when i was coming back it was jammed up inside the tunnel and i was stuck 1/2 way in it breathing in all the fumes and i hate to b stuck in their like that if you know what i mean.

just a thought. M

The Sydney Morning Herald

Fears for dollar as Saudis take fright

Ambrose Evans-Pritchard in London

September 22, 2007

SAUDI ARABIA has refused - for the first time - to cut interest rates in lockstep with the US Federal Reserve, signalling that the Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas. "Saudi Arabia has $US800 billion ($929.5 billion) in their future generation fund, and the entire region has $US3500 billion under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States."

The Saudi central bank said on Wednesday that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will lead to the collapse of the dollar peg.

As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising the Saudi economy.

The Fed's half-point cut to 4.75 per cent this week has already caused a plunge in the world dollar index to a 15-year low, touching the weakest level ever against the mighty euro at just under $US1.40.

There is a growing danger that global investors will shun the US bond markets. US data on foreign holdings released this week show a collapse in purchases of US bonds from $US97 billion to just $US19 billion in July, with outright net sales of US Treasuries.

The risk is that this could accelerate as the yield gap between the US and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit, which is expected to reach $US850 billion this year, or 6.5 per cent of gross domestic product.

Mr Redeker said foreign investors have been pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25 to 30 per cent of the US's credit and short-term paper markets over the past two years.

"They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in the dollar to $US1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.

"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem."

Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.

Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was under pressure. The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, driving the property market into even deeper crisis.

"If [Fed chief] Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," Mr Rogers said.

The Federal Reserve, however, clearly calculates the risk of a sudden downturn is so great that it outweighs the dangers of a dollar slide.

For Saudi Arabia, the dollar peg has become a liability. Inflation has risen to 4 per cent and the broad money supply (M3) is surging at 22 per cent.

The pressures are even worse in other parts of the Gulf. The United Arab Emirates faces inflation of 9.3 per cent, a 20-year high. In Qatar it has reached 13 per cent. Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.

Telegraph, London

Thanks Bush!!!!!!!!!

1.40 = 1 euro?

omg

by next May we might not be able to afford to go to paris! - it was bad enough last year at 1.60US

Maybe the Saudis better consider giving Americans an oil price break. The worst thing our economy has faced in decades is the price of gas here. It has stopped growth throughout the country. Hitting both upper class and middle class workers alike.

Many people can not afford to take on new projects since 911. The cost of doing business went up drastically since 911. Not everyone can afford new fuel efficent cars.

I should have sold my Toyota before it dumped. I went looking a parts car only to find that a 1995 car with way over 200,000 miles selling for an average of $3,500.00 around these parts.

$1.40 per euro is better than $1.60 per euro! Although I don't think it's ever been $1.60 per euro - you sure you weren't comparing that to the UK pound (the dollar has now dropped so much you get over $2 to the pound now)?

A euro used to cost just 80c a few years back. At $1.40, Europe is becoming very expensive for US visitors.

yes - sorry - it WAS UK - I get it all mixed up in my memory LOL

I'm sure everybody is going to get all broken up that you might not afford to go to Paris next year.

MEOW. HISSSSSSSSSSS.

that's why I have him on ignore

he has nothing to add but drive-by insults

waste of life reading it