For many years, oil-rich Persian Gulf states have pegged their currencies to the dollar. Now that link is stoking a bad bout of inflation in their red-hot economies and putting policy makers in a dilemma: Break the dollar peg and risk undermining the U.S. currency, or keep it and face growing local discontent.
The dollar peg has "served the economy...very well in the past," said Sultan Nasser al-Suweidi, the governor of the United Arab Emirates' central bank, last week. "However, we have reached a crossroads."
The weekly dollar chart says sell me:
This is a beat market chart. Prices are making lower lows and lower highs. Prices are also continually breaking previous support levels.
If this happens -- one of these countries breaks their dollar peg -- the chances are better than 50% it would start a run on the dollar (in my opinion). It would cause a short-term dislocation in the market. It would be very, very, bad.
3 comments:
Bonddad,
Can you be more specific on why you think this would cause a run on the dollar? And what do you think the chances are that the gulf states would agree to take such a drastic measure? Thanks.
J
Bonddad:
Let's hypothetically assume there will be a run on the dollar. Can you lay out what the likely consequences would be, short, medium, and long-term?
Bondad,
Still no followup on my original comments:
"Can you be more specific on why you think this would cause a run on the dollar? And what do you think the chances are that the gulf states would agree to take such a drastic measure?"
Leaves me to think you really have no clue what you are talking about in this situation. When you post this sort of trash it does not serve the investment community; it is not much different than the rubbish you hear on CNBC every day.
Please back up your statements with some meaningful supporting facts.
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