IMF to try and prop it up...go gold

  1. 5,447 Posts.
    Just watching what the yanks are thinking....
    http://news.bbc.co.uk/hi/english/business/newsid_2097000/2097064.stm

    The head of the International Monetary Fund, Horst Koehler, has warned that
    central banks worldwide might need to work together to prop up the US
    dollar.

    In an interview in the Financial Times newspaper, Mr Koehler said that "no
    intervention at all is not the right answer" should the dollar continue to
    decline in a "disorderly fashion".

    The dollar has fallen by around 10% in the last few months, nearly reaching
    parity with the euro.

    But the US administration is opposed to intervention in currency markets.

    In September 2000, during the presidential term of Bill Clinton, the US
    Treasury did agree to joint action to boost the value of the euro, which had
    reached a record low of around $0.84.

    Alan Greenspan, the influential head of the Federal Reserve, the US central
    bank, is expected to give his view on the dollar's weakness when he
    testifies to Congress on 16 July.

    Danger of meltdown

    The global fall in stock markets amid uncertainty over the strength of the
    US economic recovery has led to further doubts about the strength of the
    dollar.

    The US is also facing the largest trade deficit in its history.

    A weak dollar would hurt exporters in Europe and the Far East by making
    their goods more expensive in the US, while in turn increasing inflationary
    pressures there.

    Mr Koehler said that there was a danger that financial markets could
    "exaggerate problems so that they become a self-fulfilling prophecy".

    But he admitted that there was a one-in-five chance of a global financial
    meltdown.

    That could happen if a further stock market collapse in developed nations
    happened at the same time as debt defaults by developing countries such as
    Brazil and Turkey - both receiving IMF help at the moment.

    And he warned that the financial excesses of the past had created problems
    for governments and international institutions.

    "We can't have a world where excessive profits are reaped, and then, all of
    a sudden, the IMF and governments have to repair the damage," Mr Koehler
    said.

    [...]
 
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