Was just reading very interesting stuff on the Saudi's not following the latest interest rate cut in the US. The article is from almost 2 weeks ago... Apparently since then, there's been hedgefunds speculating on a revaluation and both Saudis and Kuwaiti's are dissing the dollar.. And also Hong Kong wants out of a peg... Anybody in on this?
From The Telegraph: Fears of dollar collapse as Saudis take fright
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml
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.
hi merijn,
i saw this too and it does look serious, tho evans pritchard always stresses that the dollar is on the edge of total collapse, which seems kind of unlikely - short term at least - insofar as china et al need to go on holding the dollar if they want to maintain a global and US market for their goods.
maybe saudi arabia feels less dependent, but is this realistic? what if the middle east did storm out of the dollar? while the dollar - not withstanding the massive soarings and swoonings of recent weeks (yesterday for one) - is looking less and less desirable, the USA remains an important market, not just the global hegemon. not to mention its military means for enforcing the dollar fiat should economic incentives dwindle.
perhaps the US's creditors will have to swallow the recession-depression with the US up until the point where they truly can do without its consumers.
but in terms of years and decades, if not weeks and months, this could be sooner rather than later judging by the speed of china's growth!
sorry not to offer more concrete detail on the subject in question. frankly i have no idea what's going to happen with this and i doubt anyone else does.
All best,
Ben