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Fears Of Dollar Collapse As Saudis Take Fright

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Telegraph story

Fears of dollar collapse as Saudis take fright

By Ambrose Evans-Pritchard, International Business Editor

Last Updated: 7:29pm BST 19/09/2007

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich 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 $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn 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," he said.

The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably 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 its own economy.

:unsure:

Crikey!

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Guest Bart of Darkness
Yes but, where's RB?

To be honest that was my very first thought as well. RB does (or did) have a very strong faith in the durability of the dollar.

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Guest Popalot
Yes but, where's RB?

This Dollar currency thing is just so over.

It is not taking quite the hit you would expect against the pound. RB is correct about Cable.

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Yikes! :blink:

The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country

How do they do that without dropping interest rates? Does it involve fighter jets in any way? :ph34r:

dstars? Anybody? Please tell us the meaning of the phrase "appropriate measures" coming from the central bank of a totalitarian Islamic state that controls a quarter of the world's oil? Is it good, or bad?

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Crikey indeed.

I am well out of the dollar. It's going south.

Saudis aren't going to be doing anything to upset the Americans right now. Without them their Monarchy would be toast. It is the pound that you have to be worried about. Central Banks piled into the GBP when the UK was raising IRs. If Merv even hints they are intending to cut tomorrow when he is in front of those MPs, then the pound will be crushed.

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The real story is this one here:

There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.

This will kill the Dollar. To safe the USD, they will have to raise IRs to possibly far over 20%. The early 1980s give you an idea of it, although I think they will need to go much higher this time. Possibly the only solution will be backing the USD by gold again, using the equilibrium price that should be somewhere between $10,000/oz to $50,000/oz.

It will be very interesting to watch.

EDIT: Oh, yes, the Pound is not much better, only, they might not lower IRs that much first place.

Edited by Goldfinger

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It just won't happen..

a few stories in the press are not going to change the value of the dollar. Imports are getting stronger.. and china needs the dollar to fuel its growing economy. If anything the dollar will drop slightly and raise itself back up again.

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To safe the USD, they will have to raise IRs to possibly far over 20%. The early 1980s give you an idea of it, although I think they will need to go much higher this time. Possibly the only solution will be backing the USD by gold again, using the equilibrium price that should be somewhere between $10,000/oz to $50,000/oz.

Ben's got another plan

This time it'll work

Or we'll be struck down

Struck down

http://youtube.com/watch?v=5GwtpdA9v_8

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The first domino has already fallen.

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.

And get this...

There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.

First time I have seen that. Foreigners have effectively stopped buying US debt. That's it game over...

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It just won't happen..

a few stories in the press are not going to change the value of the dollar. Imports are getting stronger.. and china needs the dollar to fuel its growing economy. If anything the dollar will drop slightly and raise itself back up again.

yes... thats nice :lol::lol:

EDIT: reminds me of the monty python sketch

BLACK KNIGHT:

I'm invincible!

ARTHUR:

You're a looney.

BLACK KNIGHT:

The Black Knight always triumphs! Have at you! Come on, then.

[whop]

[ARTHUR chops the BLACK KNIGHT's last leg off]

BLACK KNIGHT:

Oh? All right, we'll call it a draw.

ARTHUR:

Come, Patsy.

BLACK KNIGHT:

Oh. Oh, I see. Running away, eh? You yellow bastards! Come back here and take what's coming to you. I'll bite your legs off!

Edited by debtfree

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Guest DissipatedYouthIsValuable
The real story is this one here:

This will kill the Dollar. To safe the USD, they will have to raise IRs to possibly far over 20%. The early 1980s give you an idea of it, although I think they will need to go much higher this time. Possibly the only solution will be backing the USD by gold again, using the equilibrium price that should be somewhere between $10,000/oz to $50,000/oz.

It will be very interesting to watch.

EDIT: Oh, yes, the Pound is not much better, only, they might not lower IRs that much first place.

The Indian Rupee doesn't like the pound much.

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The first domino has already fallen.

And get this...

First time I have seen that. Foreigners have effectively stopped buying US debt. That's it game over...

I am a big dollar bear, have been for years, but you have to think about this for a minute. The US is still a major exporter to the world. Everything from silicon chips to Jumbo Jets and everything in between. Foodstuffs, vacations, films, Ipods, sofware, internet equipment, earth moving equipment. The list is endless.

This will put a floor under the dollar.

Also, the dollar has already crashed! It has been crashing for the last 5 years.

If the dollar index hits 60-70 you will see a major revival in US manufacturing.

Now lets examine the GBP. If the UK goes on a rate cutting campaign, where is the floor for the pound?

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Now lets examine the GBP. If the UK goes on a rate cutting campaign, where is the floor for the pound?

Stop it, you're scaring me. The world needs call centres, right?

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Telegraph story

:unsure:

Crikey!

Indeed big news. But wouldn't the next step be for Saudi to ask for Euros or

Yen for oil ? Dare they ?

Okay, that's not going to happen tomorrow but It can't be too far off.

The end of the petro dollar would mean the end of the dollar as the world's reserve

currency , would it not?

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Stop it, you're scaring me. The world needs call centres, right?

I mean, look at India. They're a call-centre nation and their standard of living is... oh. Oh my god :o

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Stop it, you're scaring me. The world needs call centres, right?

I'm just making a point about the USD, and it seems you see a USD collapse story every day now. The Americans don't give a crap about the value of their dollar, and the ones I've spoked to say it would be a good thing if it kept dropping as it would help exports.

As for inflation in the US. Even with the dollar collapsing over the last 5 years, it still is way cheaper than the UK and Eurozone. A weak dollar will hurt the Eurozone more that it would the US. That is my opinion.

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Guest happy?
It just won't happen..

a few stories in the press are not going to change the value of the dollar. Imports are getting stronger.. and china needs the dollar to fuel its growing economy. If anything the dollar will drop slightly and raise itself back up again.

You haven't really got the hang of HPC. Think Armageddon, think absurdly irrational, think outrageous exaggeration, and then re-post.

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You haven't really got the hang of HPC. Think Armageddon, think absurdly irrational, think outrageous exaggeration, and then re-post.

Let's just for a minute stop and think about what the US would do if say every central bank in the world said we're selling our dollars. The US would do just what it did '71 when the closed the gold window. It would default on the dollar and adopt and new currency, let's call it the Amero for arguments sake. US citizens would be able to exchange the old dollar for the amero at say 1:1, and foreign holders would exchange at lets say: 10:1.

Fair? No

What are you going to do about it? Nothing.

See, while you have 200 military bases around the world and more weapons than most countries put together you can sort of make the rules up as you go along.

So the US dollar collapsing sending the US into Hyperinflation like Zimbabwe - Nope not gonna happen.

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You haven't really got the hang of HPC. Think Armageddon, think absurdly irrational, think outrageous exaggeration, and then re-post.

King replaces the pound with pine nuts! Seasonal currency never hurt anyone, BoE chief says!

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