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Let the good times roll: IMF deeply concerned about falling US$

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  • Let the good times roll: IMF deeply concerned about falling US$

    The International Monetary Fund is in behind-the-scenes talks with the US, China and other major powers to arrange a series of top-level meetings about tackling imbalances in the global economy, as the dollar sell-off reverberates through financial markets.




    IMF acts to avoid markets meltdown

    Heather Stewart, economics correspondent
    Sunday May 14, 2006
    The Observer


    The International Monetary Fund is in behind-the-scenes talks with the US, China and other major powers to arrange a series of top-level meetings about tackling imbalances in the global economy, as the dollar sell-off reverberates through financial markets.
    Amid tumultuous trading, which sent the dollar to its lowest level in a year against the euro in late trading on Friday and gave the FTSE its worst day for three years, the IMF was working privately to exercise its new powers to bring decision-makers together.

    At the IMF's Spring Meetings last month, its managing director, Rodrigo de Rato, was handed new responsibilities to carry out 'multilateral surveillance', assembling groups of relevant countries to discuss critical issues in the global economy. With the long-predicted dollar bear market sending ripples throughout the world, the IMF is keen to use its powers as soon as possible.

    Analysts believe the weakening of the dollar is the beginning of a long-awaited readjustment in the global economy. After the Federal Reserve appeared to hint last week that it could pause in its series of interest rate rises, attention in the markets switched to the weaknesses of the US economy.

    David Bloom, currency strategist at HSBC, described the switch of focus as a 'regime change'. 'I'm saying don't use the philosophical methodology you used last year: chuck it away. The market has wholesale changed the way it looks at the world,' he said, predicting that the euro could rise to $1.40 over the next 12 months, from its current level close to $1.29.

    Few analysts expect IMF discussions to result in a concerted deal on stemming the dollar sell-off; but governments and central banks will want to avoid a crisis.

    'We are in meltdown mode,' said David Brown, chief European economist at Bear Stearns. 'It's all being whipped up into a bit of a selling frenzy. The dollar has a massive portfolio of negatives against it: it's the long-term problems of the trade deficit, and the government's budget deficit.'

    Bloom warned that 'phase two' of a sell-off would cause turmoil in the equity markets, as on Friday, when both the Dow Jones and FTSE saw sharp losses. 'I'm expecting an increase in volatility and uncertainty across the board,' he said.

    Brown added that the dollar's woes were likely to be exacerbated by central banks shifting their reserves towards other currencies, including the euro. 'Asian central banks have been buying fistfuls of dollars as the flipside of their massive current account surpluses. They're long dollars.'

    He added that with the US current account deficit with the rest of the world worth 7 per cent of its GDP in 2005, the White House and the Federal Reserve would probably be happy to watch the dollar decline. 'I don't think Washington's going to be concerned,' he said.

    "Washington won't be concerned"? WTF?

  • #2
    Tell China to allow their currency to fluctuate based on the market and we'll see how things develop.

    Comment


    • #3
      Yay! It's a pay raise for me every time the dollar drops
      Stop Quoting Ben

      Comment


      • #4
        Originally posted by Harry Tuttle
        Tell China to allow their currency to fluctuate based on the market and we'll see how things develop.
        Originally from the OP
        "...The dollar has a massive portfolio of negatives against it: it's the long-term problems of the trade deficit, and the government's budget deficit.'
        (\__/) 07/07/1937 - Never forget
        (='.'=) "Claims demand evidence; extraordinary claims demand extraordinary evidence." -- Carl Sagan
        (")_(") "Starting the fire from within."

        Comment


        • #5
          I wonder which country the US has the biggest trade deficit with.
          “As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do.”
          "Capitalism ho!"

          Comment


          • #6
            Originally posted by DaShi
            I wonder which country the US has the biggest trade deficit with.
            That's because the US doesn't export enough things that people want.
            (\__/) 07/07/1937 - Never forget
            (='.'=) "Claims demand evidence; extraordinary claims demand extraordinary evidence." -- Carl Sagan
            (")_(") "Starting the fire from within."

            Comment


            • #7
              You're kidding?
              “As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do.”
              "Capitalism ho!"

              Comment


              • #8
                Is he? What the hell do we export which can't be done overseas for less money?

                Comment


                • #9
                  Originally posted by Vesayen
                  Is he? What the hell do we export which can't be done overseas for less money?
                  He'd better be, if that's his answer. Otherwise, it shows complete ignorance of trade economics.

                  You've hit the point much better. The fact that these things are much cheaper to be produced overseas. The US used to have a thriving export industry until it moved it to China and third world countries.
                  “As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do.”
                  "Capitalism ho!"

                  Comment


                  • #10
                    Originally posted by Vesayen
                    Is he? What the hell do we export which can't be done overseas for less money?
                    With the dollar declining, that answer might change...

                    (Don't we export a lot of food?)
                    "I read a book twice as fast as anybody else. First, I read the beginning, and then I read the ending, and then I start in the middle and read toward whatever end I like best." - Gracie Allen

                    Comment


                    • #11
                      Originally posted by DaShi


                      He'd better be, if that's his answer. Otherwise, it shows complete ignorance of trade economics.

                      You've hit the point much better. The fact that these things are much cheaper to be produced overseas. The US used to have a thriving export industry until it moved it to China and third world countries.
                      Which as I continue to say, is our damn fault.

                      We shot ourselves in the foot and its proboably too late to change(without drastic measures whose immediate down side is so awful they'll never happen, so we'll accept the worse, but more distant one instead).

                      Comment


                      • #12
                        I doubt that the decline of the dollar will make that much difference given the Chinese tariffs and the lack of US tariffs for Chinese goods. What really needs to be done is to let the RMB rise, but big businesses and China itself don't want that.
                        “As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do.”
                        "Capitalism ho!"

                        Comment


                        • #13
                          Originally posted by Vesayen


                          Which as I continue to say, is our damn fault.

                          We shot ourselves in the foot and its proboably too late to change(without drastic measures whose immediate down side is so awful they'll never happen, so we'll accept the worse, but more distant one instead).
                          I agree. The US is entirely to blame for its own downfall. However, it's not too late for it. The US, and many other countries as well, have gone through far worse and come out of it in the past.
                          “As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do.”
                          "Capitalism ho!"

                          Comment


                          • #14
                            Originally posted by DaShi
                            You're kidding?
                            Some country would go to the US and say, "We want to buy this gitzmo." But the US would say, "Hey, you are on this list of countries we don't sell gitzmo to. Want some widgets instead?"
                            (\__/) 07/07/1937 - Never forget
                            (='.'=) "Claims demand evidence; extraordinary claims demand extraordinary evidence." -- Carl Sagan
                            (")_(") "Starting the fire from within."

                            Comment


                            • #15
                              Originally posted by DaShi
                              I doubt that the decline of the dollar will make that much difference given the Chinese tariffs and the lack of US tariffs for Chinese goods. What really needs to be done is to let the RMB rise, but big businesses and China itself don't want that.
                              How much do you think the RMB is going to rise? 50%?

                              Even if that's the case companies will simply move their factories to cheaper countries, say, Ethopia.
                              (\__/) 07/07/1937 - Never forget
                              (='.'=) "Claims demand evidence; extraordinary claims demand extraordinary evidence." -- Carl Sagan
                              (")_(") "Starting the fire from within."

                              Comment

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