Tor, I think this macroeconomic theory has some validity, but my economist
friends were skeptical when I shared a similar essay with them offline.
However, sometimes it takes time for events to unfold that tell the whole
story.
The Paul Harris piece you posted follows very closely this other essay,
detailing a vast petrodollar scheme. Contact me if you'd like to see the
file I have. Ed Weick's posting from Mother Jones by R. Dreyfuss ("The End
Game?" 030303) is compatible with this scenario, in my opinion. As they
say, we shall see. - Karen Watters Cole
Dollar Hits 4-Year Low Verses Euro
By Carolyn Cohn, Reuters @
http://www.washingtonpost.com/wp-dyn/articles/A44158-2003Mar5.html
Wednesday, March 5, 2003; 6:09 AM
LONDON (REUTERS) - The dollar weakened beyond $1.10 to the euro for the
first time in four years on Wednesday after comments from Treasury Secretary
John Snow inspired fresh doubts about Washington's strong dollar policy.
Snow, when asked by reporters on Tuesday if he was worried about the
dollar's fall since the meeting of Group of Seven finance ministers in Paris
on February 21-22, said he was "not particularly concerned about that." A
Treasury spokesman put a temporary brake on the fall by saying Snow still
favored a strong dollar and that "the secretary's position has not changed."
But the dollar resumed its slide in European time, losing one percent from
the U.S. close at its worst levels. "The dollar is going to stay on the
back foot," said David Mann, currency strategist at Standard Chartered. "I
don't think Snow really meant to imply the strong dollar policy has gone,
which is why we haven't seen an even bigger move, but the euro is already
having a significant run as we wait for some resolution to the Iraq
situation."
The dollar fell as far as $1.1003 per euro, before recovering to $1.0962 by
5:50 a.m. EST. German Economy Minister Wolfgang Clement said a euro above
$1.10 could hurt Germany's export industry.
The euro shrugged off a survey showing the euro zone service sector
contracted in February. A majority of economists polled by Reuters expect
the European Central Bank to cut interest rates from the current 2.75
percent when the central bank meets on Thursday.
The dollar also hit three-year lows against an index of currencies and
four-year lows against the Swiss franc. It was also down nearly half a
percent against the Japanese yen at 117.38, half a yen above recent
six-month lows.
The U.S. Institute for Supply Management releases its non-manufacturing
index for February at 10 a.m. EST, forecast at 53.4 from 54.5 in January.
Snow Break From Iraq
The dollar has fallen in recent weeks against the euro and other currencies
on concerns about a possible U.S.-led war against Iraq. The Snow incident
briefly diverted the market from wondering if and when the U.S. might attack
Iraq to make good on its efforts to disarm it of the weapons of mass
destruction Washington says Baghdad is hiding from United Nations
inspectors.
"People are looking at Snow's comments and seeing a shift in tone on dollar
policy," said Ryan Shea, senior international economist at Bank One. "THE
EURO IS SEEN AS BEST PLACED TO TAKE ADVANTAGE OF THIS, PARTICULARLY AS
GEOPOLITICAL RISKS STILL FAVOR SHORT DOLLAR POSITIONS."
Britain and the U.S. are pressing for a second U.N. resolution declaring
Saddam Hussein has had his last chance to disarm, effectively a trigger for
war, but many are worried they could take action without broad international
support. The United States said it was gaining support in the U.N. Security
Council for a resolution against Iraq, as Turkey gave Washington hope it
could be allowed to open a northern front there for any invasion and the
American troop build-up intensified.
Despite U.S. confidence it would get enough votes for a U.N. resolution
authorizing war with Iraq, positions hardened among the main protagonists
with U.N. Secretary-General Kofi Annan pleading on Tuesday for a compromise.
No date for a vote is set but U.S. and British officials have said they want
to push for one next week.
"Technical Step" By Boj
The market showed no reaction to the Bank of Japan's decision to raise its
target for the volume of current account deposits held by financial
institutions at the BOJ from April to 17-22 trillion yen ($145-188 billion)
from 15-20 trillion.
The BOJ emphasized that this was merely a technical step to accommodate
changes to Japan's postal savings system next month. Analysts said the move
was not a policy change but was purely technical.
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