IMF head: Dollar could collapse

Uh-oh. The outgoing head of the IMF thinks that the dollar might collapse:
"There are risks that an abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets," Rato said at the close of annual meetings here of the IMF and the World Bank.

The outgoing IMF managing director spoke here as the European single currency hit a new high of 1.4347 dollars and global equity markets plunged amid renewed fears a US credit crunch could pitch the world's biggest economy into recession.

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  1. Aw, bugger. I was hoping my worries were ungrounded.

    Never forget, never back down: if this happens, it’s George Bush’s fault, top to bottom, front to back, start to finish.

  2. Come on everybody! Now’s the time to make a run on the banks! I’ll race ya to market crash… On your mark, get set, go!

  3. “…an abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets…”

    Um, isn’t that kind of circular? “The price going down could either be triggered by, or itself trigger, people believing it’s less valuable.” Duh.

  4. Now that is a completely stupid thing to say. These things tend to become self-fulfilling prophecies.

  5. What does he mean ‘might collapse’? From the perspective of someone living outside the US but paid in USD (and with a shrinking 401k) it already *has* collapsed.

    When I moved up to Canada it was US:CA 1:1.6. Now it’s 1:0.98

    If China were to delink currency the US would implode. You’ve completely outsourced your economy!

  6. Well — “Some emerging economies that have relied on external financing to fund large current account deficits could be tipped into crisis by a combination of reduced demand for their exports and tighter financial market conditions,” the IMF chief said.

    So at least the American economy won’t be tipped into crisis or anything. Whew!

  7. Oh, and by the way, as somebody with large debt in dollars and mostly paid in Euros, I’m not at all rooting for the dollar collapse, no, no, not at all. That would be … mean.

  8. Micah@3:
    Yes, that’s exactly what happens. Northern Rock, a UK bank, in fact the sixth most well off in the country, found itself approaching a liquidity problem a couple of months ago due to the sub-prime crisis, and was given an emergency loan facility by the Bank of England. This created the belief that the bank was in trouble (it wasn’t, the loan was a short term bridging facility as the bank was finding trouble placing some of its mortgage funds in the market) and caused a lot of people to try and attempt to withdraw their savings. This then turned into a lack of confidence in the stock market, and the bank’s shares dipped. The Bank of England intervened again, for the first time in 30 years, the message got through to the saving customers and the bank recovered, but it has been weakened and commentators expect it not to be in the market place under the Northern Rock name in the next year to eighteen months.
    To apply that to a country we have to go back to 1992: George Soros and others made a run on the pound sterling and the Italian lira which caused the UK government to raise interest rates from 10% to 12% and ultimately to 15% to attract investment. In the meantime the speculators kept selling pounds and the government was forced to leave the Exchange Rate Mechanism. Interest rates stabilised at 12%, the UK economy went into recession and the Conservative government lost its popularity which contributed to Labour taking power in 1997.
    All it needs are a group of determined bodies to want to make some money out of the US dollar, selling it for a stronger currency, probably the Yen, and the dollar could easily collapse in the same way.

  9. Don’t forget folks, that if our economy(US) goes down, so does yours. Because we will stop buying all the crap that you make and export to our country. So if you work in a factory that makes a product for export, your job is not safe.

    Welcome to globalization.

  10. If I know my international currency exchange (and I probably don’t), China detaching itself from the dollar would be good for us, as our debt to them would be worth less, and our exports would be more attractive. China, as China is wont to do, has been playing dirty by keeping the Yuan artificially inflated for the same reasons.

  11. @5: What the hell is my money doing in your house Bill? *punch*

    @6: Given that a lot of high finance is speculation, there tends to be many self-fullfilling prophecies. If everyone believes the USD is on the verge of collapse, then it is. If everyone thinks the USD is fundamentally strong then it is.

    This isn’t to say that there isn’t real data to back up either of these assertions, I’m sure you could make an argument for both, but what matters is the zeitgiest.

  12. Tim (7): I know! On top of that, the Chinese are holding our debts, and we’ve been running a budget deficit that’s unparalleled in world history. If the dollar takes a dive, overseas currencies will shift over to the Euro, and we’ll lose that sweet deal — possibly forever. Either way, there’s going to be blood spilled in our housing market.

    Everyone in the US who’s going to get richer off Bush administration policies already has their pile of money and is busy squirreling it away in a safe place. The people who voted for Bush because they thought they’d do better are going to get screwed right along with the rest of us.

  13. Coaxial, too many people know the USD has been gutted. Meanwhile, you know all those nations whose goodwill Bush figured he didn’t need? They’re not going to be doing us any favors.

  14. “The dollar COULD collapse”?

    Darling, it’s already happened. Ask any American living abroad.

    George Bush realized that he couldn’t get his World War III until he triggered Great Depression II.

    For Christ sake….. I used to be proud of being an American. These days, I try to hide it as best I can.

  15. You know what really bites?

    “Conservatives” and blowhard populist pundits will blame it on high taxes, Clinton, “welfare moms” and mexicans, and they’ll get away with it. They’ll convince everyone that Social Security has to be done away with, and that worrying about the environment is a effete liberal fad.

    The bastards responsible for all this will sail through it while bitching about their account in the Caymans only earning 2%.

  16. Wht grt nws! ‘v bn wtng fr th dy whn th mrcn mpr wld cm t n nd. bvsly nt ll mrcns r sshls bt ‘v bn < hrf="http://srzy.blgspt.cm/2007/10/sprfcl-mrcns.html">lvng hr fr thr yrs, nd hv nvr mt mr rrgnt, cllss, vr-prvlgd bnch f ppl n my lf wth sch dsgstng sns f nttlmnt (mddl-clss, wht mrcns n prtclr). t’s bt tm tht y wr tppld ff yr pdstl.

  17. Eclectro@11:

    You’re *only* 300 million or so people out of a population of six billion. There’s another 300 million over here with a similar disposable income who the Chinese are more than happy to sell to. And that 200 million of India’s billion who have the disposable income to buy from China, and Africa’s prosperous, who the Chinese have been courting as investment and as customers. Sure, the US is probably China’s main market but there’s a lot more people out there. Hmm… who used to do that?

  18. @11

    My country (UK) and the US have an almost uncannily similar amount of export to/ from each other, whilst you’re more dependent on our visitors than we are to yours[1].

    To be honest, the $ collapsing would affect us a lot less than you think. Welcome to the realities of the US’s place in the world.

    Still, nice to visit and get cheap jeans.

    (U.S. exports of goods and services to the United Kingdom in 2006 totaled $92 billion, while U.S. imports from the U.K. totaled $93 billion…. In 2005, 3.4 million U.S. residents visited the United Kingdom, while 4.2 million U.K. residents visited the United States.

    http://www.state.gov/r/pa/ei/bgn/3846.htm)

  19. Don’t worry citizens. The Amero is on it’s way! Hello North American Union! Goodbye national sovereignty, representative democracy, US Constitution, and Bill of Rights.

  20. …how can I become an ex-pat?

    Now’s when I wish I got a computer science degree that would make my skills valuable in other countries, instead of this crappy Journalism undergraduate degree…fuuuuuuck I shoulda became an engineer so I can haul my ass to any country in Europe at the whim of a company that wants to hire me …..

    Jesus Christ.

    Interesting times ahead.

  21. “You’re *only* 300 million or so people out of a population of six billion. There’s another 300 million over here with a similar disposable income who the Chinese are more than happy to sell to.”

    The United States is, what, 5 percent of total global population. But we purchase about 20 percent of total global exports.

    A dollar collapse would be a worldwide economic disaster that would especially hit the developing world.

  22. #12: I guess you don’t know your foreign exchange. China is artificially keeping their currency low, not high, in order to encourage exports. Also, our debt is denominated in dollars, in the form of some $800+ billion US Treasury bills, so the exchange rate doesn’t have much to do with how we feel that debt here.

  23. Not being brilliant there, FreeYourCRT:

    Don’t worry citizens. The Amero is on it’s way! Hello North American Union! Goodbye national sovereignty, representative democracy, US Constitution, and Bill of Rights.

    First, in that scenario, we’d still have national sovereignty. We’d also have representative democracy. The Constitution and Bill of Rights might have to be negotiated, and we’d swap “Life, Liberty, and the Pursuit of Happiness” for “Peace, Order, and Good Government.”

    Second, kiss it goodbye, because it’s never going to happen. Canada would have to agree to it, and they know us far too well for that.

  24. @27 You’re right – that should have read “deflated”
    Our debt would be worth less since weak dollar is inflationary – not only would the Chinese be getting less back in yuan, we would be paying back less in real dollar value.

  25. Anyone in europe want to adopt a Engineering and communications graduate? I can cook, clean, and have been told I look pretty decent in…:) Ah, but seriously, I wonder how many college graduates have the same mindset as I do, that its looking more and more interesting to move out of this country.

  26. #28 – “Second, kiss it goodbye, because it’s never going to happen. Canada would have to agree to it, and they know us far too well for that.”

    Don’t bet on it; the current numbskull sitting in 24 Sussex Drive seems to have his head far enough up Odious George’s rectum to be able to see the scars left by Tony Blair and John Howard.

  27. Canada’s saving grace is the French. They’d riot before they’d let any kind of union with Washington DC & Holdings go ahead.

  28. Oh, thank goodness. I was 3/4 through my Google Reader feed today and had yet to find the obligatory Sky-Is-Falling blog post from someone. Thank you, Cory, for keeping my world dependable.

  29. @31

    As a college student I totally agree. Europe and Canada are looking worth their higher video game prices.

  30. Well DUH! That’s what happens in capitalism: “boom and bust.” What do you want, a socialist paradise with people living in harmony with each other and the earth?

    Pussies!

  31. @ Ill Lich;

    “Well DUH! That’s what happens in capitalism: “boom and bust.”

    NOOOO, that’s what happens when a government and a central bank conspire to counterfeit a currency. See the wikipedia entry for “Austrian Business Cycle Theory” or Ludwig von Mises. Then research the only candidate for president who is not only talking about the existential threat a dollar collapse poses, but who actually has a plan to stop it – Ron Paul.

  32. There is a way out of this dollar mess for the americans. They have to raise their taxes. If they can show to the rest of the world that they are willing to address their budget deficit then the dollar may stabilize.
    This is the less painful way to stop the dollar collapsing. Their only other alternative is to raise interest rate which will surely cause a recession.
    Unfortunately, I don’t have any confidence in their current president making this decision.

  33. It is frightening to think that the Euro cost $0.80 just three years ago. No wonder why I see so many more foreign tourists in New York!

  34. The writing has been on the wall for ages America – WAKE UP to what your president is doing to YOUR COUNTRY!! Your Federal Reserve is corrupt and owned by a cartel of bankers who own nearly every central bank in nearly all countries worldwide other than Iran, Syria, Libya & North Korea (not sure about China & Russia – still looking into that) Until recently Iraq was on that list but they got that sorted didn’t they??? Does that tell you anything???? 911 might have shaken you up but doesn’t seem to have WOKEN YOU UP! On June 4, 1963 President John F Kennedy signed a Presidential decree – Executive Order 11110 stripping the Federal Reserve of its power to loan money (because that’s exactly what it does) to the United States Federal Government at INTEREST. Yes that’s right – this cartel prints YOUR MONEY and charges YOU INTEREST on it ensuring you are all kept in a perpetual sea of debt. Needless to say that upset the cartel and the rest is history isn’t it. The cartel is:
    Rothschild Bank of London
    Warburg Bank of Hamburg
    Rothschild Bank of Berlin
    Lehman Brothers of New York
    Lazard Brothers of Paris
    Kuhn Leob Bank of New York
    Israel Moses Seif Banks of Italy
    Goldman, Sachs of New York
    Warburg Bank of Amsterdam
    Chase Manhattan Bank of New York
    Do your own research or if you are too lazy to do that watch Zeitgeist which SPELLS IT OUT FOR YOU.
    A conspiracy ceases to be a conspiracy once evidence is there to support it. The movies content was no news to me but it will be for millions. Anybody who debunks it is just ignorant of the facts. By the way you people of the world are referred to by this cartel as the USELESS EATERS and they wish to exterminate most of you. Did you know that there is a cure for cancer and has been for over a hundred years? Do what you will but if you wish to be informed then DO YOUR OWN RESEARCH AND STOP BLITHLY BELIEVING WHAT YOUR MEDIA TELL YOU – THEY WORK FOR THE CARTEL. While you’re at it do a search on nuclear warheads that were ACCIDENTLY flown from Minota Air Force Base to Barksdale Airforce Base in late August. Once you know the facts behind it and if you are alarmed by this THEN YOU SHOULD BE! While you’re at it do a search on birth defects in Iraq and see what DU does for a nation. YOUR NEXT – if you allow your president to go to war with Iran that show will be coming to YOUR COUNTRY! Russia & China are allies of Iran and you don’t want to be upsetting them. BUT the Cartel don’t own their central banks or their oil and they will stop at nothing until they do. So good luck with your so called democracy. The dollar crashing is just the start and it’s been the ballgame for years it’s what Bush was put in power to do. Assist the NWO with their grotesque plans. I will leave you with this quote:

    “I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled dominated governments in the world…no longer a government of free opinion, no longer a government of conviction and role of the majority, but a government by the opinion and duress of small groups of dominant men.

    Woodrow Wilson 1913 (who signed over the Fed to these criminals)

    Oh hang one ONE MORE!

    “It is well enough that the people of our nation do not understand our banking and monetary system for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt”

    John F Haydon
    Mayor of New York (1918 – 1925)

    You still don’t know and you still don’t seem to care so may God Bless you America because you lot sure aren’t helping yourselves.

  35. hello..i am the “sleeper”mentioned by most conspiracy theorist and the likes. I am now awake and its shitty. i cant do shit against these monsters. with every ounce of me i want to stand up but im afraid to even speak about it openly. some agent in a suit takes me out… i disapear or become a “terrorist” suspect…. they’ve got the camps already built for people who dare to oppose…

    damn…alife of porn and mcdonalds was great.. alli had to do wa fit in… mow i cant conect with anyone. god i feel helpless…i’dlike nothing more than a revolution but all i see is containment! were on the net and not the streets man

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