U.S. DOLLAR INDEX NEARING ALL TIME LOW
September 20th, 2007Guys, I don’t believe it, but the U.S. Dollar Index is at 78.37 as I type.
78.33 is the all time low set back on August 31, 1992.
Where’s the Plunge Protection Team? HA
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So, we see a small uptick to 78.42 as of around noon CST, US time.
If the PPT is a work here, I can’t help but wonder where they’re getting the money to buy dollars.
Oh–duh–printing presses. They sure can’t borrow to buy dollars any more.
I keep reading these reports that foreigners are going to quit financing the U.S. current account deficits. Now if I know my rules of international finance correctly, the U.S. must import one dollar of foreign-originated capital for every dollar of current account deficit in a given period (i.e. the capital account must be in balance with the current account). So if the Asians and OPEC pull the plug on the U.S., our current account deficit must immediately shrink, most likely in the form of cratering imports.
But wait a second. Our own Federal Reserve has a contingency plan in place for meeting this foreign financing requirement. It is wiring cash to Caribbean banks (which have tighter banking secrecy laws than Switzerland), where the digidollars are being used to buy U.S. treasuries through phoney hedge funds set up by the Fed with the assistance of the City of London, and these *real*, foreign-originated U.S. dollars gained from the sale of the bonds is used to meet America’s capital account requirements.
And in this way, the current account deficits can continue indefinitely, even as the rest of the world bails out on the dollar, no?