OMG! ---IMF/Fed efforts to prop up the sinking dollar

"Plaza-lite" is not a term I had heard of before today, but I think it may figure prominently in our futures.

Central bankers are backing Plaza-lite
By Liam Halligan
(Filed: 14/05/2006)

On Friday the dollar plunged to a 12-month low. With sterling close to $1.90 and further dollar falls likely, we could soon see a $2 pound. Good news, then, if you have booked a holiday in America. But that is where the good news ends. The dollar - after a period of sustained decline - is now dangerously fragile against all major currencies. That presents serious risks.

Friday also saw a one-year low against the euro. The dollar has, in fact, sunk by almost 7 per cent in just six weeks against America's main trading partners. A slip of just 1 per cent more, on the same measure, will mark a 33-year low.

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The markets are referring to this perceived "deal" to weaken the dollar as "Plaza-lite". Back in 1985, faced with a similarly bloated America, the industrial nations united to manage a smooth dollar decline. That agreement was called the Plaza Accord - after the New York hotel where the meetings took place.

Speaking to Congress last month, Bernanke outlined the dangers of defusing America's deficit. "While it is likely that current account imbalances will be resolved gradually over time," he said, "there is a small risk of a sudden shift in sentiment that could lead to disruptive changes in the value of the dollar and other asset prices." In other words, the dollar could collapse - causing more systemic concerns that spread into equity markets. Could such a scenario happen?

Well, with the markets becoming more convinced of "Plaza-lite", traders are already quitting the dollar in droves. The currency's sharp fall in recent days, in turn, has sparked fears about US inflation. We are now seeing the result - shares on Wall Street have dived, a trend now affecting the City.

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my former employer will find an excuse to raid?

start trading commodities (say, oil) in other currencies...probably accelerating Iran's wish to get its "Euro-bourse" up and running.
This necessarily makes the DC hawks quite anxious, tightening their finger on THAT trigger....

so too goes our nation. Will the rest of the world embrace us and help 'smooth' down our economy this time? Are you fucking kidding me? Should have kept the secrets of capitalism under lock and key.

Raise Taxes, Pull Back from Foreign Entanglements, Allow Medicare to Negotiate for better Drug Prices, Cut Pork-Barrel Spending, Seek "Real" Economic Recovery (not artificial/temporary/ineffective and harmful "tax-cut boosts")... Basically, roll-back everything Shrub's government has done in it's five point five years...

A "collapse" scenario is unlikely. Not impossible, but nothing's impossible. It's just that there's so many dollars that a collapse, as opposed to sustained slide, isn't likely.

What I'm getting from this is that we are going to see a period of explosive inflation unless some drastic measures are taken.
Do I read this correctly, or am I way off base...again?
:dunce:

Depends on how foreign investors feel about propping up the dollar, it still is the universal currency (but that has been changing to the euro as of late). IMO, the problem now is that if the Feds start to pump to much new currency into the market, it will cause hyper-inflation. Think the Peso in the 80s. Some problems really do require a debt ceiling. :eyes:

IMF acts to avoid markets meltdown

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

http://observer.guardian.co.uk/business/story/0,,1774162,00.html

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.


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'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.

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You'd almost think our domestic media was trying to keep bad economic news away from the public!

Sunday May 14 2006 . All times are London time.



Dollar ignores helping hands to continue its slide
By Steve Johnson
Published: May 12 2006 12:01 | Last updated: May 12 2006 18:03

DollarAnother week, another set of losses for the dramatically diminishing dollar, which on Friday slumped to its lowest level since October 1997 in trade-weighted terms.

The continuing sell-off came amid a series of events that should, in theory, have aided the greenback. The Federal Reserve released a broadly hawkish monetary policy statement, Thursday's US trade data was far better than feared, and the US Treasury declined to formally cite China for currency manipulation, a ruling that would have been expected to drive further Asian gains against the dollar.

<snip-- need account to read the rest>

https://registration.ft.com/registration/barrier?referer=http://news.google.com/news?client=firefox-a&rls=org.mozilla:en-US:official_s&hl=en&ie=UTF-8&oe=UTF-8&tab=wn&ncl=http://observer.guardian.co.uk/business/story/0,,1774162,00.html&location=http%3A//news.ft.com/cms/s/83017a6c-e1a4-11da-bf4c-0000779e2340.html