The Greenback Buy-Back Plan: Why The Rising US Dollar is the World’s Biggest Hoax
US economy, international economy, news and updates August 27th, 2008
Still not convinced that there is central bank intervention in the markets or that the markets aren’t really “free” anyway? Here’s the most direct example you’re going to find. Toronto’s Financial Post analyst Jacqueline Thorpe reports - just now, in August 2008, - that back over one weekend in March 2008, just after the Bear Stearns fiasco, the “G3″ got together to plan how they were going to co-ordinate a “greenback buy-back” plan in order to save the paper-thin house of cards called the US Federal Reserve. Here’s an excerpt from the full article:
The United States, Europe and Japan drafted a contingency plan to shore up the U.S. dollar in March, as Bear Stearns and global financial markets were imploding, according to a report in the Nikkei on Thursday. The Japanese financial publication reported the G3 also considered issuing an emergency statement through the Group of Seven industrialized nations…
“Officials from the U.S. treasury department, Japan’s finance ministry and the European Central Bank drew up the currency intervention plan over the weekend of March 15-16,” the Nikkei said… “In addition to agreeing on the need to limit excessive swings in the foreign exchange market, they hammered out a framework for co-ordinating a dollar-buying intervention.”
The report said the parties did not set a specific exchange rate for initiating an intervention or outline the potential scale of the operation. But in the event of a potential free-fall the plan called for their respective central banks to aggressively buy dollars while selling yen and euros. Under the framework, Japan was to supply the yen necessary for the underlying currency swaps. A previously established swap mechanism between the U.S. and Europe was to be used as well, the report said…
So the world will bail out the US dollar even as the Fed bailed out its rightly failing banks. Too bad so many other countries that really need the help can’t get such a golden “hand-up” as the world’s biggest debtor nation.
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6 Comments to “The Greenback Buy-Back Plan: Why The Rising US Dollar is the World’s Biggest Hoax”
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In my opinion it is only a matter of time before the dollar goes into freefall. The simple fact of the matter is that by intervening now they are just pushing the inevitable back by a couple of months. Gold should see a serious spike in the coming months if this intervention fails.
The question I have is how long can they go on buying dollars for?
It’s definitely amazing that they’ve been able to prop things up for this long in the first place. Imagine a credit card holder who keeps transferring his balances from one card to another, and another, and another, practicing arbitrage all the while and just never pays it off. What happens to this person? Do the same rules apply or not to the US?
It is in the world’s best interest to have a stronger US dollar as that will mean lower oil prices. However, it will be very difficult to keep propping up the US dollar when the US government keeps churning out ridiculous massive deficits.
good post - i stumbled it.
Thanks LOD!!
@Double: yes, it’s largely the trade deficit that is horrendous and an embarrassment.
I’m not sure that there’s anything inherently better for the world about having a “stronger” US dollar if that strength is merely relative. For one, oil can be priced in any currency, that’s rather arbitrary (see my post on the Iranian Oil Bourse in Euros). Number two, if we’re talking about a strong US economy (ie., not a “strong” fiat currency), then of course that would be better. It’s always better when borrowers pay back their lenders.
I was talking stronger US dollar better in terms of oil price as high oil is causing inflation as oil is a cost of just about everything that is made whether as a material input or freight. US dollar is inversely related to oil.
Sure oil can be priced in any currency and could happen but most likely will not.