Bill Bonner, Fed Flounders as U.S. Dollar Drowns

Fed Flounders as U.S. Dollar Drowns
By Bill Bonner "Three years or so ago, we suggested that the dollar would go to $1.50 per euro. The buck promptly went up - making a fool of us. But even the world's luckiest currency cannot escape the fundamental laws of economics forever."


07/12/07 - A Farewell to DollarsBy Dan Denning "Each country plays a different role in the global drama, with different strengths and weaknesses, different pitfalls and opportunities."

07/11/07 - Heads Roll in China"Yesterday, the Chinese government executed its former food and drug chief. Zheng Xiaoyu gasped his last breaths only a little more than a month after his May conviction for accepting bribes to approve a controversial antibiotic that killed 10 Chinese citizens."

Greenback humbled by concerns over US economy

The catalyst for this latest dollar weakness is concern that the US
consumer, for years the mainstay of the economy, could be flagging. Such worries
followed evidence that the US housing market still does not appear to be finding a
bottom along with news that retailers are suffering.

Subprime mortgages extended to borrowers with risky credit histories were again in the spotlight this week. On Tuesday, rating agency Moody's downgraded a swathe of
subprime-backed bonds, while Standard & Poor's placed $12bn of such debt on
notice of downgrade, sparking further selling of US corporate bonds and widening
premiums, or spreads, for derivatives protecting against default.

"One reason why the dollar has responded in such a negative fashion is that corporate bond inflows have made up half of the current account financing in the past year," says Alan Ruskin, chief international strategist at RBD Greenwich Capital.
"Wider US credit spreads are a dollar-negative event."