♠ Posted by Emmanuel in Cheneynomics
at 11/09/2009 03:57:00 PM
A few days ago I questioned the empirical basis for determining whether dollar shares of global reserves were falling as the currency once again entered a full-on swoon. Lo and behold, it seems that there are more folks coming out of the woodwork with even more outre stories. Again, I would very much like to believe that countries around the world no longer believe in the usual American "strong dollar" hypocrisy. Kick those Yankee econocrusaders and greenbackjihadists where it hurts, I say. Drive interest rates stateside to kingdom come. Punish them for fouling up the world economy with the largest deficits it has ever seen. Bad behavior should be punished with extreme prejudice.Anyway, that rant aside, the latest round of dollar kicking today which has seen the euro rise above $1.50 is being attributed to two things. First, the bad jobs numbers last Friday when unemployment in the US climbed into double digits likely means American near-zero interest rate policy will remain in place for some time. Next, US Treasury Secretary Tim "Deficits Still Don't Matter" Geithner didn't even bother to try and fool anyone with "strong dollar" talk at the G-20 over the weekend. The end result is an effective "kick me " sign posted on the (very wide) backside of the US. From TIME:
So has the dollar finally used up the last of its nine lives? There are worrying signs that the world is losing its appetite for dollars. The International Monetary Fund announced on Nov. 2 it was selling 200 metric tons of gold to India's central bank for $6.7 billion. News of the purchase sent gold prices to an all-time high. The move was widely seen as part of an effort by central banks around the world to diversify their extensive U.S. dollar holdings. Steven Englander, chief U.S. currency strategist at Barclays Capital in New York City, figures that in the second quarter, dollars accounted for only 37% of new reserves accumulated by central banks worldwide. That's the lowest proportion on record for any quarter during which reserves increased significantly. At a time when many central banks are boosting their reserves, they are choosing to buy euro and yen instead. "Central banks are doing more than talking about reducing the concentration of [the U.S. dollar] in their reserve portfolios. They are actually acting on their statements," Englander wrote in an October report.37% of new reserves? I sure would like to ask Englander where he gets these truly Armaggedon-like figures. Surely, he must have some empirical basis for these eye-opening figures. Keep tempting fate, Yankee econocrusaders and greenbackjihadists. Sooner or later your time in gonna come, and I certainly don't want to be stuck with your toilet paper when it does.
