More on the dollar fall

The US currency has slid to a series of record
lows against the euro this week and to multi-year
troughs against a range of other currencies as
investors focused on the big US current account
and budget deficits.

...

The dollar fell to a near five-year nadir
against the yen, which rose to 102.15 to the
dollar, the highest level since January 2000.

The dollar's decline lifted gold prices above
455 dollars an ounce for the first time in 16
years.

The latest blow to the dollar came from a report
in the Shanghai-based China Business News that
China had cut the size of its US Treasury bond
holdings in its foreign exchange reserves.

Although the report was later denied, it fanned
concerns that central banks in Asia, Russia and
the Middle East would continue switching their
foreign currency reserves from dollars into euros.

...

So maybe, just maybe these central banks have not
yet started to dump $. Don't bank on it. I see
an 80% probability of a free fall coming soon.
Then they will for sure.

But at HypoVereinsbank, chief economist Martin
Huefner said: "There wouldn't be much point at
the moment to buy dollars...The ECB simply
wouldn't have a chance against the strong anti-
dollar sentiment on the market at the moment. If
the ECB were to intervene now, it would require
astronomic sums. A few billion euros would not do
the job."

Herr Huefner knows what he's talking about. I
suspect a few billion wouldn't even make a blip on
the charts and that looks like a good way to loose
their asses.

It's widely believed that 46% of the US debt is
held abroad. As the dollar drops, expect the bonds
to tank as well. I don't doubt that folks are
already dumping this debt and Greenspan will not
be able to raise interest rates fast enough to make
up for the fall of the $ and so enticing the holders
to keep holding.

The Argentine Experience all over again?
(A nice concise report the above is, just covering
the high points.)

Mark Twain was purported to have said, "History
doesn't repeat itself, but it rhymes" but most know
sqwat about economic history.

Sooner or later the political economy hits the fan.

You heard it all here, first...as far as I know.

The whole report.