Friday, Mar 13, 2009
Gloves come off-beggar thy neighbour currency devaluations get serious
FT: The Swiss franc factor
The Swiss National Bank’s abrupt move on Thursday to intervene to push down the Swiss franc raised alarm bells...It was the first time a leading central bank has intervened in the forex markets since Japan sought to weaken the yen in 2004, as Peter Garnham, the FT’s currencies correspondent, reported on Friday, and the move has fuelled speculation that countries are set to engage in a bout of competitive devaluation.... The problem is that not everyone can devalue at once - someone has to be left with an overvalued currency. [something must end higher, commodities and shares of debt-free companies is my guess]
Posted by mountain goat @ 10:17 AM (481 views) Add Comment
2 Comments
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1. uncle tom said...
Yesterday, someone in the US administration had a bit of a dig at China over Tibet - quite timid really, and less than the Chinese deserve.
The Chinese govt put out the standard rebuff about meddling in its internal affairs.
Then, at a news conference, Premier Wen Jiabao went out of his way to say that he was 'worried' about the value of Chinese owned dollar assets, i.e. Treasuries.
Quite a modest little remark, but calculated; a shot across the bows - 10yr treasury yields jumped.
The Chinese wanted the yanks over a barrel, and now they have their wish..
If the Americans want to join the devaluation party, they will have to do it on a massive scale, with massive inflation to follow, because the global appetite for their government debt will completely evaporate as soon as they begin.
For that reason, I think they will try to ride out the storm without resorting to that option on any scale, although I'm not saying for certain they will succeed.
I therefore believe the dollar will probably gain value against Sterling, possibly going beyond 1:1.
But it's anyone's guess what will happen to the euro..
2. mrmickey said...
The United States are finding that the borrower is the slave of the lender, unless of course the borrower just doesn't pay up then the baseball bats come out.