One of the reasons the price of gas is going up is very simple. The dollar has been tanking for a number of months and "The Shiek of Air-rub-Bee" (with apologies to Spike Jones and his wonderfully funny musical take off on that old tune) is not about to take a 30% reduction in the price per barrel of oil since OPEC pegs the dollar as their currency. The dollar sinks, they take a cut.
Hey, the Canadian Looney is now on a par with the buck, and the Euro is what, at 1.45 to the dollar? When the French President and Chinese bankers are warning America and Congress about the faltering dollar it's time to WAKE UP!. Pres. Sarkozy said the dollar's decline could lead to "economic war" you know it is way past time to let the big banks take the hit for their foolish subprime loans,and raise interest rates to increase the strength of the dollar. That swhooshing sound if the sound of the world's investors dumping American investments and dollars and buying European, Euros, Swiss Francs and Gold.
REVIEW & OUTLOOK
Adam Smith Growls WALL ST. JOURNAL November 9, 2007; Page A18
"The U.S. dollar is the linchpin of not only the American economy but also the world monetary system." Those words were the lead of an editorial in this newspaper on August 21, 1978, amid the inflation of the 1970s and the world's last great dollar crisis. Are we watching another such period today? It's not inevitable, but this week we all got a reminder of what such a thing looks like, and it isn't pretty.
The dollar is "losing its status as the world currency," declared Xu Jian, a middling official at China's central bank, on Wednesday. "We will favor stronger currencies over weaker ones, and will readjust accordingly." That was perceived as a threat by China's central bank to diversify its foreign exchange reserves out of dollars and into other currencies, especially euros. While China later qualified those remarks, the dollar nonetheless fell again around the globe, stocks plunged, and gold and other traditional inflation hedges rose to fresh heights.
Meanwhile, French President Nicolas Sarkozy visited Washington and brought a dollar warning of his own. "The dollar cannot remain someone else's problem," he told Congress. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims." The Frenchman was referring to the damage that the dollar's record lows against the euro are doing to Europe's exports, and the potential for a return to so-called "competitive devaluation," or what used to be called "beggar-thy-neighbor" currency policies.
* * *
Coming from opposite sides of the world, these are warnings worth heeding. For as our editorial explained 30 years ago, the dollar is far more than a medium of American exchange. It is a reserve currency, held by central banks the world over, and the core of the monetary system that underpins what has been a remarkable period of global economic growth. By toying recklessly with dollar devaluation, our policy makers are also toying with a far larger economic crisis than the current credit problems.
Hey, the Canadian Looney is now on a par with the buck, and the Euro is what, at 1.45 to the dollar? When the French President and Chinese bankers are warning America and Congress about the faltering dollar it's time to WAKE UP!. Pres. Sarkozy said the dollar's decline could lead to "economic war" you know it is way past time to let the big banks take the hit for their foolish subprime loans,and raise interest rates to increase the strength of the dollar. That swhooshing sound if the sound of the world's investors dumping American investments and dollars and buying European, Euros, Swiss Francs and Gold.
REVIEW & OUTLOOK
Adam Smith Growls WALL ST. JOURNAL November 9, 2007; Page A18
"The U.S. dollar is the linchpin of not only the American economy but also the world monetary system." Those words were the lead of an editorial in this newspaper on August 21, 1978, amid the inflation of the 1970s and the world's last great dollar crisis. Are we watching another such period today? It's not inevitable, but this week we all got a reminder of what such a thing looks like, and it isn't pretty.
The dollar is "losing its status as the world currency," declared Xu Jian, a middling official at China's central bank, on Wednesday. "We will favor stronger currencies over weaker ones, and will readjust accordingly." That was perceived as a threat by China's central bank to diversify its foreign exchange reserves out of dollars and into other currencies, especially euros. While China later qualified those remarks, the dollar nonetheless fell again around the globe, stocks plunged, and gold and other traditional inflation hedges rose to fresh heights.
Meanwhile, French President Nicolas Sarkozy visited Washington and brought a dollar warning of his own. "The dollar cannot remain someone else's problem," he told Congress. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims." The Frenchman was referring to the damage that the dollar's record lows against the euro are doing to Europe's exports, and the potential for a return to so-called "competitive devaluation," or what used to be called "beggar-thy-neighbor" currency policies.
* * *
Coming from opposite sides of the world, these are warnings worth heeding. For as our editorial explained 30 years ago, the dollar is far more than a medium of American exchange. It is a reserve currency, held by central banks the world over, and the core of the monetary system that underpins what has been a remarkable period of global economic growth. By toying recklessly with dollar devaluation, our policy makers are also toying with a far larger economic crisis than the current credit problems.
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