In Reply to: Re: Monetary exchange posted by Mike on November 28, 2004 at 20:25:52:

Allowing the dollar to weaken benefits US exports - but more importantly it reduces the price of oil. Thus the present hike in oil prices caused by some poor decision making in certain quarters is not as apparent as it would otherwise be due to the weak dollar. Of course if OPEC decides to price oil in a stronger currency such as Swiss Franc or Euro then even more adverse impacts could be seen.

They were suggesting the other day that central banks wouldn't start intervening until the dollar hit something like $1.45 to the euro. The trouble about that kind of talk is that it just encourages speculators and almost becomes self-fulfilling. Anyone who lived (i.e. paid) through the speculative run on the pound etc, back a number of years now and saw mortgage interest rates go to something like 14% as the central banks tried to fight off the speculators without devaluing their currencies will know what I mean. It was scary stuff. Long live the euro as that kind of thing is unlikely ever to occur again. Provided of course that countries stick to the basic agreement re balance of payments.

The French and Germans seem to think they are exempt and this could have adverse impacts. For sure if any European country lets rip outside the terms of the euro agreement in anything vaguely approaching what is going on stateside at the moment in respect of deficit budgeting we can kiss cheap mortgages goodbye?