Coyote Blog

5 Comments

1. Ray:

   We'll see if the EU can come up with their own plan of action today. My guess is no. Far too many decentralized, competing interets; and without a true source of authority for quick action on financial crises, I'm pretty sure the US is going to stay the center of commerce for a long time to come.

   October 4, 2008, 8:33 am

2. Mesa Econoguy:

   I think “bailing out” may be a poor choice of words here….

   The rise of the dollar is attributable to the lack of interbank liquidity in things like Eurodollars, and the substitute is US dollar-denominated funding.

   October 4, 2008, 10:15 am

3. Elambend:

   Longer term the Dollar is going to fall against the Yen. The Euro has the same problems behind it as the dollar.

   October 4, 2008, 10:32 am

4. ErikTheRed:

   @Elambend - Do you have more info or links on this assertion? I don't know nearly as much about this as I probably should (having a small business that does some importing)...

   October 5, 2008, 3:08 am

5. Brad Warbiany:

   Now, I could be wrong on this, as I'm not an economist...

   But it seems to me that much of the fall of the dollar was related to huge growth in the monetary system based largely on an insane amount of leverage inherent in the financial system. When the downturn began, that leverage started to unwind, destroying wealth (and contracting the amount of money flowing through the system). The unwinding of leverage being an inherently deflationary process.

   This bailout, though, acts to try to stop the unwinding of leverage (or actually to increase the base holding so the system is less leveraged by increasing the actual base of that leverage). It seems that the Treasury, in an effort to combat potential deflation, will start to trigger even more inflation.

   We had a chance to improve the value of the dollar, but our Congress chose otherwise on Friday.

   October 5, 2008, 11:05 am