Fears grow about U.S. dollar stability
{{date|September 20, 2007}}
[[Image:Usdollar100front.jpg|thumb|right|300px|Front of the U.S. $100 Federal Reserve note.]]
The [[w:Economy of the United States|U.S. economy]] and its [[U.S. dollar|currency]] as an instrument of world trade has suffered a series of major setbacks in recent months. Some analysts say that the [[w:Federal Reserve System|Federal Reserve]]'s September 18<sup>th</sup> dramatic rate cut to 4.75% from 5.25% may be a case of "too little, too late", or that it was excessive and dooms the dollar.

Today, [[Saudi Arabia|Saudi]] officials declined to cut interest rates in lockstep with the US Federal Reserve for the first time in decades. According to [[w:Ambrose Evans-Pritchard|Ambrose Evans-Pritchard]], International Business Editor for [[w:The Daily Telegraph|The Daily Telegraph]], "it's a signal 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 [[w:Middle East|Middle East]]."

Hans Redeker, the Currency Chief at [[w:BNP Paribas|BNP Paribas]], also stated today that Saudi Arabia's move to not adjust their own interest rates in sync with the Fed's cuts is a very dangerous situation for the [[w:United States dollar|US dollar]]. Redeker points out that "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."

Saudi central bank officials said that "appropriate measures" would be taken to stop the large capital inflows into the country. The Federal Reserve's half-point rate cut has already caused a plunge in the world dollar index to a fifteen-year low, reaching the weakest level ever against the [[w:Euro|Euro]] at just under $1.40.

The Fed hopes that by making it cheaper to borrow, people will start spending and investing more. However, some analysts fear the cut will worsen inflation, making it harder to get personal loans, and further decrease confidence in the dollar around the world. There are already signs that global investors have started rejecting [[w:Treasury security|U.S. Treasury securities]], and recent U.S. government data on foreign holdings show a decline in purchases of US securities from $97bn to just $19bn in July. 

In response to [[w:Ben Bernanke|Ben Bernanke]]'s statements today about a potential mortgage and housing market crisis, [[w:CNN|CNN]] anchor [[w:Wolf Blitzer|Wolf Blitzer]] said, "If adjustable mortgage rates go up, people may not be able to afford their mortgage payments." Former Federal Reserve chief [[w:Alan Greenspan|Alan Greenspan]] said earlier this week that housing prices may fall by "double digits" as the [[w:Subprime lending|subprime]] crisis bites harder, prompting households to cut back sharply on spending.

[[w:Jim Rogers|Jim Rogers]], the economic commentator and former partner of [[w:George Soros|George Soros]], stated, "If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems."

In recent months, the U.S. dollar has taken several other significant hits including [[Kuwait]]'s decision in May to also break its dollar peg, and threats by [[China]] to interfere with the U.S. economy, calling it their nation's "nuclear option". According to public sources, the [[w:Government of the People's Republic of China|Chinese government]] has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions that seek to force a [[w:Chinese renminbi|Yuan]] revaluation.

{{haveyoursay}}
==Related news==
* {{Wikinews|title=Canadian dollar reaches parity with US dollar|date=September 20, 2007}}

==Sources==
*{{source
 |url    = http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml&CMP=ILC-mostviewedbox
 |title  = Fears of dollar collapse as Saudis take fright
 |author = Ambrose Evans-Pritchard, International Business Editor
 |pub    = The Daily Telegraph
 |date   = September 20, 2007
}}
*{{source
 |url    = http://ap.google.com/article/ALeqM5hhsOwOsGhKflopz_JpXK3wHVsCTA
 |title  = Bernanke Assures Hill on Mortgage Hit
 |author = Jeannine Aversa
 |pub    = Associated Press
 |date   = September 20, 2007}}
*{{source
 |url    = http://news.bbc.co.uk/1/hi/business/6999821.stm
 |title  = Fed cuts interest rate to 4.75%
 |author = 
 |pub    = BBC News Online
 |date   = September 18, 2007}}
*{{source
 |url    = http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml
 |title  = China threatens 'nuclear option' of dollar sales
 |author = Ambrose Evans-Pritchard, International Business Editor
 |pub    = The Daily Telegraph
 |date   = August 10, 2007}}

{{publish}}
{{archived}}

[[Category:United States]]
[[Category:North America]]
[[Category:Economy and business]]
[[Category:Ben Bernanke]]
[[Category:United States dollar]]
[[Category:Currency]]
Front of the U.S. $100 Federal Reserve note.
The U.S. economy and its currency as an instrument of world trade has suffered a series of major setbacks in recent months. Some analysts say that the Federal Reserve's September 18th dramatic rate cut to 4.75% from 5.25% may be a case of "too little, too late", or that it was excessive and dooms the dollar.

Today, Saudi officials declined to cut interest rates in lockstep with the US Federal Reserve for the first time in decades. According to Ambrose Evans-Pritchard, International Business Editor for The Daily Telegraph, "it's a signal 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."

Hans Redeker, the Currency Chief at BNP Paribas, also stated today that Saudi Arabia's move to not adjust their own interest rates in sync with the Fed's cuts is a very dangerous situation for the US dollar. Redeker points out that "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."

Saudi central bank officials said that "appropriate measures" would be taken to stop the large capital inflows into the country. The Federal Reserve's half-point rate cut has already caused a plunge in the world dollar index to a fifteen-year low, reaching the weakest level ever against the Euro at just under $1.40.

The Fed hopes that by making it cheaper to borrow, people will start spending and investing more. However, some analysts fear the cut will worsen inflation, making it harder to get personal loans, and further decrease confidence in the dollar around the world. There are already signs that global investors have started rejecting U.S. Treasury securities, and recent U.S. government data on foreign holdings show a decline in purchases of US securities from $97bn to just $19bn in July. 

In response to Ben Bernanke's statements today about a potential mortgage and housing market crisis, CNN anchor Wolf Blitzer said, "If adjustable mortgage rates go up, people may not be able to afford their mortgage payments." Former Federal Reserve chief Alan Greenspan said earlier this week that housing prices may fall by "double digits" as the subprime crisis bites harder, prompting households to cut back sharply on spending.

Jim Rogers, the economic commentator and former partner of George Soros, stated, "If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems."

In recent months, the U.S. dollar has taken several other significant hits including Kuwait's decision in May to also break its dollar peg, and threats by China to interfere with the U.S. economy, calling it their nation's "nuclear option". According to public sources, the Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions that seek to force a Yuan revaluation.
United States North America Economy and business Ben Bernanke United States dollar Currency