Gulf Petro-powers to Launch Currency in Latest Threat to Dollar Hegemony
THE TELEGRAPH: The Arab states of the Gulf region have agreed to launch a single currency modelled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate.

“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.

The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.

Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.

The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.

The Gulf states remain divided over the wisdom of anchoring their economies to the US dollar. The Gulf currency – dubbed “Gulfo” – is likely to track a global exchange basket and may ultimately float as a regional reserve currency in its own right. “The US dollar has failed. We need to delink,” said Nahed Taher, chief executive of Bahrain’s Gulf One Investment Bank.

The project is inspired by Europe’s monetary union, seen as a huge success in the Arab world. But there are concerns that the region is trying to run before it can walk. >>> Ambrose Evans-Pritchard | Tuesday, December 2009

Bush’s Empty Rhetoric on the Need for a Stronger Dollar
TIMESONLINE: President Bush issued a call for a rise in the value of the US dollar on currency markets yesterday in a signal of mounting official alarm in Washington about the effect of the slumping greenback on the world’s largest economy.

In an exclusive interview with The Times on the eve of the United States-European Union summit in Slovenia, Mr Bush expressed concern about the dollar’s continuing weakness and said that he favoured an appreciation in the US exchange rate.

“We want the dollar to strengthen,” he said on Air Force One as it crossed the Atlantic bound for the summit.

The President did not suggest that the United States was preparing to back its rhetoric on the dollar with any formal intervention in the exchange markets. He said that the “relative evaluations of economies will lead to that dollar strengthening”. President Bush Betrays Fears over Economy with Strong Dollar Call >>> By Gerard Baker and Tom Baldwin on board Air Force One | June 10, 2008

The Dawning of a New Dark Age (Paperback – USA)
The Dawning of a New Dark Age (Hardcover – USA)

Is the Greenback Due for a Comeback?
SPIEGELONLINE INTERNATIONAL: After years of weakness, the US currency may be at a turning point. Who would gain -- and lose -- from a greenback comeback?

There's a growing sense among currency traders that the US dollar might finally stop its long slide against other major currencies.

The euro almost hit $1.60, a record high against the dollar, on Apr. 22, the same day the dollar index -- a measure of the greenback against a basket of major currencies -- also showed record weakness.

But since then, the buck has been on a modest upswing. The euro traded at $1.54 on May 2, and the dollar index is 3 percent off its lows. "We think the dollar is carving out a bottom," says Meg Browne, senior currency strategist at Brown Brothers Harriman.

The main cause of the dollar's recent strength is the same reason for its rapid collapse over the past year: the US Federal Reserve. The dollar's value suffered when the Fed cut interest rates rapidly to stem the financial crisis and prevent a US recession. The turning point may have been on Apr. 30, when the Fed lowered the fed funds rate target by a quarter-point, dialing back on its policy easings after a series of half-point cuts. Many believe the central bank is putting its rate-cutting on hold for now. Has the Dollar Hit Rock Bottom? >>> By Ben Steverman

The Dawning of a New Dark Age (Paperback – USA)
The Dawning of a New Dark Age (Hardcover – USA)

Authorities Lose Patience with Collapsing Dollar
THE TELEGRAPH: Jean-Claude Juncker, the EU's 'Mr Euro', has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.

Momentum traders have blithely ignored last week's accord by the G7 powers, which described "sharp fluctuations in major currencies" as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday.

"I don't have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting," he said.

Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising "protectionism" in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar.

World central banks last intervened eight years ago - with mixed success - buying euros in September 2000 to support the fledgling currency through its worst crisis.

David Woo, currency chief at Barclays Capital, said the Europeans and Americans are talking past each other. Whatever the G7 wording, Washington is happy to watch the dollar slide. "They are not going to worry unless there is a knock-on effect on US equity or bond prices. So far that hasn't happened. There are no signs that the dollar decline has turned disorderly," he said.

European industry has managed to live with the high euro so far, but the damage of major currency shifts can take years to surface. "The moment will come where the exchange rate level will start to cause serious harm to the European economy," said Mr Juncker. Authorities Lose Patience with Collapsing Dollar >>> By Ambrose Evans-Pritchard | April 18, 2008

The Dawning of a New Dark Age (Paperback - UK)
The Dawning of a New Dark Age (Hardback - UK)

Dollar Fear Sparks Rush to Oil and Gold
THE FINANCIAL TIMES: Crude oil prices briefly hit the psychologically important $100-a-barrel level and gold prices jumped to an all-time high as investors on Wednesday poured money into commodities following deepening fears about the weakness of US dollar.

The oil price rally soured the first stock trading day of the year, with the S&P 500 down at midday by 1.4 per cent.

Higher energy prices could limit central banks’ ability to lower interest rates to cushion the impact of the credit squeeze and also reduce consumer purchasing power, weakening the economy even further.

The dollar fragility, which makes dollar-denominated commodities cheaper to non-US investors, comes after the US manufacturing sector slumped to its lowest level in five years during December, igniting a sharp rally in government bonds.

The Institute for Supply Management said that its manufacturing index for December fell to 47.7, its lowest level since April 2003, and well below the 50.8 in November. A reading below 50 indicates a contraction in activity and has historically served as a harbinger of a recession. Dollar fear sparks rush to oil and gold >>> By Javier Blas in London and Michael Mackenzie in New York

Mark Alexander (Paperback)
Mark Alexander (Hardback)

The Dollar Nosedive
SPIEGELONLINE INTERNATIONAL: The ailing US economy seems to be driving the exchange rate of the dollar inexorably downward, with serious consequences for the global economy. Politicians and central bankers are looking on helplessly as the economic outlook worsens by the day and European companies rack up huge losses.

It costs about four cents to produce a one-dollar bill -- a pittance, compared to the greenback's influence on the world's economy.

The exchange rate of the dollar can boost the fortunes of companies and entire economies -- or plunge them into crisis. Its rate against the euro fluctuates by a few hundredths of a cent each day. But in the past five years that fluctuation has more often than not taken the US currency on a downward trajectory, causing consternation -- and now despair -- among people around the world.

Last Thursday, Thomas Enders, the CEO of Airbus, gave a speech to employees in building 261 at the consortium's production complex in Hamburg. He was there to tell them that a pain threshold had reached. The graph he had projected on the wall revealed the horrifying progression of the dollar over time. The US currency has lost 13 percent of its value against the euro since the beginning of the year. Conversely, the euro has risen in value, and for a short time last Friday it even approached the symbolic $1.50 threshold.

According to Enders, the rate at which the US currency is falling makes "reasonable processes of adjustment" a virtual impossibility. Every cent the dollar drops against the euro costs Airbus €100 million. This has even the normally optimistic Enders alarmed. "It's life-threatening," he told his audience. Why America's Currency Is the World's Problem >>>

Mark Alexander

Bet Your Bottom Dollar Tensions Will Follow
THE TELEGRAPH: The weak dollar used to be an economic issue. But the greenback has now dropped so far, and has so much further to fall, that its decline is of profound political importance. The dollar isn't any old currency. And it isn't just the currency of the biggest economy on earth. The dollar is the world's "reserve currency" - which means central banks everywhere use it to stockpile wealth. No less than two-thirds of all sovereign foreign exchange holdings are denominated in dollars.

Last week, the dollar dropped to yet another record low - reaching the verge of $1.50 to the euro. On a trade-weighted basis, the currency has, in four years, lost a third of its value. That's done the US some favours, helping its exports stay competitive. But the dollar's long dive means countries worldwide, having used the currency to store their reserves, are sitting on massive losses. That's why the dollar's demise is of major diplomatic - and even military - significance. Before this summer, the dollar was falling for economic reasons. After years of over-consumption, the US had dug itself the world's biggest ever trade deficit - 6 per cent of GDP.

These huge liabilities, and America's need to issue a steady stream of government debt, had long put pressure on the greenback. US officialdom feigned concern but, in reality, America laughed up its sleeve. A falling dollar shoved the burden of US adjustment on to the rest of the world.

In recent months, though, the dollar has headed south with a vengeance - after Wall Street recklessly securitised $900bn of sub-prime loans. And, of course, as US property prices fall and default rates keep rising, this sub-prime crisis gets worse. >>

Mark Alexander

Gerard Baker’s Alternative View on the Decline of the Dollar
TIMESONLINE: Americans paused at Thanksgiving yesterday for the traditional annual audit of their blessings. If they'd been listening at all closely to the morose lucubrations of their opinion leaders, however, it would have been pretty slim pickings.

The pundits have finally run out of bad news to report from Iraq, where, unmolested by the morbid fascination of misery-seeking reporters, the locals actually seem to be belatedly enjoying the first fruits of their liberation. So attention has turned again, as it has tended to do from time to time these past 50 years, to the inevitable collapse of the American economy.

The declining dollar is for many an ominous indication that the long period of US economic supremacy is at an end. In the past month especially, a nation that usually remains in blissful ignorance of the daily fluctuations of the foreign exchange markets has been repeatedly reminded that the dollar now buys a fraction of what it used to — down 35 per cent against the pound in the past six years and 40 per cent against that fledgeling monetary superpower, the euro.

Much has been written about the eschatological symbolism of the dollar's fall and the financial problems that have accompanied it. The apparent consensus among commentators here in America and especially in Europe is that the US has become a kind of Third World country, awash in debt and sinking fast because of a collapsing housing market and a banking system in meltdown. And all this is supposed to reflect in turn a seismic shift in the balance of global economic power away from the US and towards Mighty Europe and Emerging Asia.

Let me take a moment in this season of cheer to raise a few objections. The first and most obvious point is that there are many reasons why currencies move against each other, often in quite dramatic fashion. Seismic, epochal, geopolitical shifts are not usually the best explanation. The dollar's in decline. Great news!: Critics think it's in a crisis, but in reality America is in decent health

Mark Alexander

Is the Dollar Losing Its Lustre?
BBC: It's the lingua franca of currencies - a symbol of wealth in movies, music, backpackers' pockets and central banks all over the world. But will the dollar's current doldrums end all this?

The dollar is suffering. Rarely a day passes when something is not written about its weakness against the pound and the euro.

Since World War II, when the influx of GIs into the UK and the triumph of the American economy on the world stage ushered in a new era, the dollar has been a symbol of US industrial and cultural dominance, as well as of the glitz and glamour of the world's ultimate showbiz nation.

But in this era of uncertainty, will the dollar stay iconic or will it lose its lustre to the euro or the Chinese yuan? Is the dollar losing its luster? (more)

Mark Alexander