Fears of dollar collapse as Saudis take fright

[jordi_fanclub]

Source: Telegraph

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.

Read more: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml

[Steve_in_California]

1. If all Americans would cut their gas consumption by a mere 10%

it would bring the Saudis to their knees.

[NMDemDist2]

2. last year I cut mine by 90% and gas got higher

but this is very very bad news

[OrangeCountyDemocrat]

7. People Around Me LIKE Wasting Gasoline

I see people come screaming down the street, going like 60 in a 45 zone, even though there is clearly a red light right in their path. There have been plenty of times when I'm driving, see that the light ahead of me is red, and I start to slow down. These folks, usually in their Monster Trucks or their SUV's, come roaring up behind me, then accelerate and pass me, cut in front of me, only to realize that HEY....I NEED TO STOP SUDDENLY FOR THAT RED LIGHT DEAD AHEAD.

It's almost like they want to burn the fuel. I would love to see the look on these people's faces, if gasoline goes to $4 or $5 a gallon.

[barb162]

28. For some of these morons in their giant SUVs it 'll have to be $10.00

They do like burning fuel. They don't care.

[DS1]

56. I see people idling their cars while eating sandwiches all the time

probably so they can have their precious AC on.

Or waiting for someone to exit a building. For half an hour.

[NickB79]

57. Wanna bet? The Chinese and Indians are hungry for Saudi light sweet crude

They would gobble up any extra crude on the market for their booming domestic consumption.

[jimnasium]

58. Bought a scooter for the morning drive...

That alone will cut my gas consumption by over 50%!

Only costs me $5.50 to fill it up. It's my little way of "Sticking it to the Man!"

I'm seeing more and more Motorcycles on the road - makes me glad to see people getting it!

[endarkenment]

3. Breton Woods is but a distant memory.

And the petro-dollar that replaced it now appears to be doomed. Should be a very interesting few years ahead of us. I wonder if when the grocery bill hits $500/wk per person that people will figure out that they've been given the Royal Screw:



The Royal Screw

[superkia]

8. The wealthy will still be able to afford $500, so theres no problem.

I wonder if at that point people will finally realize they keep voting in politicians that only care about the corporations and the wealthy. We need to be slapped in the face of reality so we can hopefully force some change in the political system. Maybe then we can look at a candidate like Dennis Kucinich and think its good that he is against corrupt government. Until then we will continue to vote for the wealthy peoples candidates and pay the consequences. We get what we pay for.

[Baby Snooks]

11. But...

Dennis Kucinich doesn't have "the look" and he also doesn't have all that corporate money hanging out of his back pocket.

[superkia]

16. I know he doesnt have the advertising $$$ to compete with them.

Its just like a business, the ones with non stop national advertising (Walmart) will run the little guy out of town. And just like Walmart is doing to mom and pop business everyday, we sit back and let it happen.

[DBoon]

20. It will be like Weimar Germany

You pay for groceries with a wheelbarrow full of money, and you are mugged and the wheelbarrow is stolen (because the money is worthless)

I hate to think what might come after Weimar..

[bemildred]

4. Ah, the chumps are wised up.

If you are going to have "reserves", they need to be in something that keeps its value.

[Up2Late]

5. Oh boy! George Sr. might actually have to give George Jr. a beating if this happens!

WooHoo! Stay away from the base of tall building too. :woohoo: :hide:

[cliss]

6. Yeow. It's now becoming a case of

Pick your Poison.
Which will it be?
Arsenic or Hemlock?

England is battling with a run on their banks, and it's threatening to spread to Spain and possibly Sweden. Bankers are sitting in the board rooms right now, sweating it out.

MEANWHILE, the price of oil is spiraling upward, hitting new highs every day. People in the know are betting that it's going to go to $125 by Christmas.

Either way, this is the beginning of the Perfect Storm.

[Snarkoleptic]

9. Chimpy McFuckstain has devalued our currency by pumping $ into his Eye-Rack adventure.

The $2Bln. per month is coming hot off the presses at the treasury.
All your currency are belong to us.

[Yael]

53. Thats $2bn per WEEK

http://www.boston.com/news/world/middleeast/articles/2006/09/28/cost_of_iraq_war_nearly_2b_a_week/

"Chimpy McFuckstain"??? :rofl:

[poverlay]

10. That's very bad. Very very bad. Geez, you'd think some quality handholding would hold things

together a bit longer...

[donkeyotay]

12. jordi - ha, you're not from around here, are you?

The only news here is that OJ made bail and left in an automobile. It was broadcast live on all the channels. Now what's that you were saying about the dollar? :sarcasm: :hi:

[RUMMYisFROSTED]

13. "...recessionary conditions..."

:think:

[Strelnikov_]

38. Hans, baby, don't you know, the party line is that the economy is booming

No no-bid contracts for you.

[BikeWriter]

14. Why do you hate America?

[BeHereNow]

15. Face it- we're fucked.

Between global climate change and the global elite
snarfing up all they can before it all falls apart,
I'm not sure how long we will be here...

BHN

[Megahurtz]

24. We ARE Fucked.

Unless some kind of major turn-around happens I just see us going more and more downhill. :hurts:

[populistdriven]

32. so where would you put your retirement cash? in euros?

[CoffeeCat]

34. That's what I would like to know?

What are we supposed to do with our money????

[CountAllVotes]

36. gold ... ?

there is such a thing as a precious metals IRA. You can find out more about one as I recently noticed that APMEX.com was advertising one as was MONEX.com.

I have some hope for the dollar for one reason - it has a history unlike the Euro does and things overseas aren't going so great either with all loans (well 95%) being ARMs.

I wouldn't rush and do anything extreme. Perhaps move some of your IRA money into gold is about all I can think of.

It is one hell of a mess and Bernake's latest move was a gross error of the worst type.

The stock market is a joke. Do not move it into stocks. That is just my opinion for what it is worth which may not be much.

[macllyr]

39. in europe most house loans are fixed-rate

Sorry to disagree but I think you are talking of GB only, not the whole EU
where most of house loans are fixed-rate.

In France, 80% of house loans are fixed rate, 20% are "capped" variable rates (+-2% or +- five years out of a 20-year loan), and ARMs are not authorized.

Mac L'lyr

[CountAllVotes]

44. in Ireland they are all ARMs

I know that much.

Heard about the trouble in Sweden and Spain as well.

[appal_jack]

52. canned food, high caliber weapons, & quality hand tools

subject above is only halfway ironic.

-app

[HuffleClaw]

17. and the following day bush will decide they are the newest member of the 'axis of evil'

oh i sooooo hope they go through with it.

[TheFarseer]

18. don't they know we cut the Fed rate and everything is fine now?

The stock market was up over 300 points yesterday so that proves it. Stupid Saudis!

[ozymandius]

19. The Federal Reserve is to blame for this.

They are a rogue presence, beholden to nothing and no one except their own hubris.

[BeHereNow]

26. Exactly... biggest con job ever executed.

And they are LITERALLY laughing all the way to THEIR bank.
BHN

[harun]

40. I think B*sh barrowing money to fund the Iraq war is the culprit (n/t)

[nadinbrzezinski]

21. Ah, more signs of the fall of the Empire

[lovuian]

22. So Our friends buddies allies are going to collapse our dollar

as for as I'm concerned they are OUT to destroy America

[Lone_Star_Dem]

25. In all fairness

We've given them the power and the tools. All they may be doing is deciding to use them.

If they don't do it now, it will happen someday.

This war, our debt and the mismanagement of our economy may push that day up faster than what most people thought.

I suppose this is what happens when you have a nation that's being run by irresponsible warmongers who couldn't see the forest for the trees.

[barb162]

29. We've done it to ourselves with our wild spending combined with

low taxes these last few years. I was only wondering what will trigger the huge dollar slide. We can't keep increasing our debt levels like we've been doing. We can't pay it back.

[Shipwack]

23. A whole lot of cash...

I'm still trying to wrap my head around the figure of 3,500 BILLION dollars....

:wow:

[mr_hat]

30. I think that's 3.5 trillion in U.S. figures.

In GB, a trillion is a million million, whereas here it's a thousand million.

I think.

[psychopomp]

48. No, a thousand million is a billion. A trillion is a million million.

[YankmeCrankme]

49. the math is the same no matter where you are

A million million is equal to a thousand billion.

1,000 x 1,000 = 1,000,000
1,000 x 1,000,000 = 1,000,000,000
1,000 x 1,000,000,000 = 1,000,000,000,000
1,000,000 x 1,000,000 = 1,000,000,000,000

[progressoid]

27. oh great.

[maseman]

31. The Fed is to blame even mor ethan Shrubby

As much as I can't stand him the Fed is really at fault for all of this. As they cut interest rates back in the early 2000 range the dollar lost extreme amounts of value. It was doing better after all the rate increases because it again became more attractive to foreign investors. The only thin that can help the dollar is to RAISE the rates, not lower them. Yes, the heavy investors will take it on the chin in the shorter term due to lower stock prices but the common man with a savings account, CDs, money market funds would do better with higher interest rates. Plus it would help keep inflation in check.

The Fed's job is to keep Wall Street happy. They did that yesterday. But I predict the interest rates will increase again in the next year to even higher levels to try to save the dollar.

[CountAllVotes]

37. rates will have to go up

and all of these fools in the stock market will find out how bad it really is out there soon enough!

I agree with everything you have written. Bernake is a fool, and a stupid one at that!

:kick:

[pa28]

33. Laying the groundwork for a euro switch?

Given that they are rational about their own economic interests they can't be too happy about having so much value evaporate in an inflationary currency. I'm sure Darth Cheney will be arriving in Riyadh in the next few days to issue some veiled threats.

[CountAllVotes]

35. K&R

:dem: :kick:

[DeSwiss]

41. Oh. Shit.

- K&R

[mod mom]

42. BFEE got set up by the Saudis and we all get screwed. His fucking legacy will be FAILURE

of epic proportions.

[Tesla]

43. But he doesn't pay for it...we do...and our kids!

The KING of F^ck-ups!

[jordi_fanclub]

45. Just to compound the mess...

From today's Financial Times:

Meanwhile, he said tensions between the US and China were also set to rise ahead of the launch of the country’s sovereign wealth fund, which is intended to maximise returns on $200bn of China’s $1,330bn dollar stockpiles.

Analysts said the launch of the fund might speed up the diversification of China’s reserves away from the dollar, piling more pressure on the currency.

“With $200bn to play with, there will be heightened speculation on what they will spend their money on,” said Mr Derrick.

www.ft.com/cms/s/0/e331d7f2-6758-11dc-9443-0000779fd2ac.html

[mod mom]

46. MCM forwarded this rant about Bernacke bailing out speculators at the expense of everyone:

this is from an ANGRY former republican investor who says we are screwed.

It's frighening-can someone knowledgeble pls de-bunk it:

http://www.youtube.com/watch?v=U3N7PU9ohMI

note: MCM= Mark Crispin Miller-the NYU professor.

[Strelnikov_]

47. Now that was a rant

Thanks for the Linky

[depakid]

60. Nothing makes Republicans angrier

than the realization that their party trashes the economy every time they're in office. Makes their greedy little heads explode when they figure out they're been had.

[MetalCanuck]

50. This is real bad.

Buy gold or silver NOW folks if you know what is good for you.
I would also be thinking about getting a passport if the US
dollar falls.

[AntiFascist]

51. Perhaps this is what "Islamo-fascism" is all about....

it really means the end of America-driven imperialism, and I meant "driven" to be a double-entendre.

[w8liftinglady]

54. is this the story that got lost as we focused on OJ yesterday?

[Megahurtz]

55. That's why I don't focus on O.J. n/t

[w8liftinglady]

59. actually,i meant "the media"-I posted on this several times yesterday

[peacetalksforall]

61. How many people thought Saudi Arabia would be by our side because

they were at the Bushes side?

How many people thought the Bushes could kill as many Moslems as they wanted and it wouldn't affect our relationships with Saudi Arabia Kuwait Egypt Jordan Bahrain Qatar?

[Douglas Carpenter]

62. Bloomberg: Saudi Plans to Keep Riyal Pegged to the Dollar, King Abdulla's Adviser Says

"Sept. 20 (Bloomberg) -- Saudi Arabia is likely to keep the riyal's peg to the dollar and a cut in interest rates will ``not help the Saudi economy,'' an adviser to King Abdullah said.

``It's not necessary that there will be a de-pegging of the riyal from the U.S. dollar, not in the near future,'' Ihsan Bu- Hulaiga, who heads a government-appointed finance committee that advises King Abdullah, said in an interview. ``The issue is that we have an abundance of liquidity in the economy."

snip:"The Saudi inter-bank rate was already about half a point below U.S. rates so ``this actually brings Saudi in line with U.S. rates,'' Brad Bourland, chief economist at Jadwa Investment Co., a Saudi Arabian-based investment bank, said in a phone interview today. ``If there are further cuts though, it might be difficult for them,'' he said.

Any additional reductions in U.S. interest rates will increase pressure on Saudi Arabia to follow.

It ``would give the authorities in Saudi a choice of either getting rid of the peg or allowing interest rates to come lower and we believe they'll definitely choose the latter,'' Steve Brice an economist at Standard Chartered said.

Saudi Arabia has not always followed the Fed's rate cuts, Monica Malik, chief economist at EFG-Hermes Holding said in a telephone interview from Dubai. It did not raise interest rates in 2006 along with the Fed to help revive its sagging stock market, she said"

link: http://www.bloomberg.com/apps/news?pid=20602081&sid=aGO6cU_5z57M&refer=benchmark_currency_rates%20peg

--------------

This from salon.com regarding the author of the article from the Telegraph:

"Is Saudi Arabia afraid of the dollar?
Ambrose Evans-Pritchard, the international business editor of the U.K.'s conservative-leaning Daily Telegraph, sure knows how to move markets. In early August, he sent a shiver through bond investors when he reported that China was planning to "drop the bomb on the American dollar" in retaliation against trade pressure from the United States.

This week, on Wednesday, he sent similar shock waves through international currency markets with his speculation that a Saudi decision not to lower interest rates in "lockstep" with the U.S. signaled that the kingdom was planning to remove the "peg" that keeps the value of the Saudi riyal in a fixed relationship to the U.S. dollar. This possibility unnerved traders enough to send the already weak dollar to a historic low against the euro

I have noted previously that Evans-Pritchard's theories about Chinese intentions had some serious holes. His previous life as one of the more wacky anti-Clinton conspiracy theorists also does little to build confidence. And just as recently as a few days ago, Evans-Pritchard was spectacularly wrong when he suggested, in an article titled "Bernanke Will Prove Sterner Than Wall Street Thinks," that the Fed chairman might not be as quick to bail out the markets as investors were hoping."

link:

http://www.salon.com/tech/htww/2007/09/20/saudi_arabia_and_the_dollar/

.