French minister warns on fall of the dollar

[UpInArms]

http://news.ft.com/cms/s/ae62b964-5519-11d9-9974-00000e2511c8.html

Hervé Gaymard, France's new finance minister, on Thursday warned of a global "economic catastrophe" if the US, Europe and Asia did not work together to stem the decline of the dollar against the Euro.

As the dollar reached new lows against the European currency, Mr Gaymard voiced the strongest criticism yet from a European finance minister of the dollar's decline, saying it was "absolutely essential" that the US understood the need for "co-ordinated management at the world level" at the next G7 finance ministers meeting in February.

"If we stay as we are, with no co-ordination, one can imagine a catastrophic economic situation at the global level," he said.

However, as the "strong dollar" policy espoused by John Snow, US Treasury secretary, is nothing more than a laisser faire "markets-know-best" approach, most in the currency market believe Mr Gaymard's appeal would fall on deaf ears.

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[ayeshahaqqiqa]

1. OK, explain it to me

I thought the rise of the Euro would be something Europeans would want. Their currency could become the new international currency. Is the reason for their concern the fact that so many "American" companies are, in reality, owned and run by Europeans? Or is there more to it than that?

[UpInArms]

2. it upsets the balance

of their accounts - they take a different view on their monetary policy - since it covers many countries and each of those countries have to follow a set of guidelines regarding their budget deficits and spending.

In many ways having a stronger euro helps them with things like petroleum and imports, it destroys the markets for their exports (makes them more expensive) especially since China is tied to the dollar and the Bank of Japan has been supporting the dollar for a while - that may change as Euro/Japan trading agreements seem to be getting into a better balance - but although they can buy more for fewer euros, they tend to export less.

They also fear that the weaker dollar will make a huge global mess of everything and still believe "when the US sneezes the entire world catches a cold".

[ayeshahaqqiqa]

5. Wouldn't it behoove Europe

to convince China to base its currency on the Euro?

[UpInArms]

7. China is not a member of the G7

Members of the G-7, in addition to the United States, are Canada, France, Germany, Italy, Japan and the United Kingdom.

there is no open dialogue with China regarding its monetary policy

[ayeshahaqqiqa]

8. Ah!

I didn't know that. But if the US remains reckless, do you see this changing? Maybe the rest of the world's economic powers just bypassing the US, allowing China in the G7, changing the world's currency to the Euro?

[UpInArms]

9. check your mail

:hi:

[existentialist]

3. dollar to fall . . .

I believe the concern is not that the dollar will fall, but that it will fall precipitously when it does fall because the Bush administration has ignored financial reality until reality manifests itself with a vengeance. This would (probably will) cause great instability and uncertainty in all financial markets world wide. If there is anything markets hate it is instability and uncertainty.

[mmonk]

4. Also less money

for their companies that are over here when converted to euros.

[hadrons]

10. stronger Euro makes their exports more costly

[slor]

6. They can start helping by...

allowing my wife and I, to move to France, to a beautiful coastal town, at a deep discount!

[lovuian]

11. What the World is telling Bush be Fiscally Responsible

and he is being fiscally irresponsible!!!

[Voltaire99]

12. "Global economic catastrophe"

These words should strike fear.

We can, perhaps, understand in this context what the massive Bush tax cuts for the rich represent: umbrellas for the coming storm.

[pa28]

13. Where whole economies are at stake caution is the rule.

That's what really got my attention about this statement. This is not just hyperbole.