Bailout Plan Threat to Dollar ?

Monday, September 22, 2008 | 06:15 AM

Today's most noteworthy MSM piece is this Bloomberg article, titled. Dollar May Get `Crushed' as Traders Weigh Up Bailout.


Treasury Secretary Henry Paulson's plan to end the rout in U.S. financial markets may derail the dollar's three-month rally as investors weigh the costs of the rescue.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

"As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion. . .

"The downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis,'' said David Woo, London-based global head of foreign-exchange strategy at Barclays, the third- biggest currency trader, according to a 2008 survey by Euromoney Institutional Investor Plc.

Warning: Your currency may be smaller than it appears in the mirror . . .

Dollar May Get `Crushed' as Traders Weigh Up Bailout   
Bo Nielsen and Anchalee Worrachate
Bloomberg, September 22, 2008

Monday, September 22, 2008 | 06:15 AM | Permalink | Comments (33) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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The more I look at this plan, the crazier it seems to get. I especially worry when I hear the Democratic leadership talking about adding a few things, like 'foreclosure prevention' or CEO pay restrictions in compensation. After writing, for the first time in my life, to my representatives in Congress, I jotted down a summary for myself:

[With apologies to David Letterman]
Top Ten Reasons to Support The Treasury Bailout Plan (the Goldman Sachs Freedom Act?)

10. The best way to preserve the free market is to have one man in charge of it.
9. Eight years of Bush administration economic policy has worked so well that we need two more years
8. It is important to guarantee each citizen's constitutional right to borrow
7. We needed to replace all the hedge funds that have blown up with one bigger one.
6. There are plenty of unemployed investment bankers who need a job
5. What's good for Goldman Sachs is good for the country
4. Those earlier bailouts were good practice, but now we need to get serious
3. Freeing the banks to loan more will surely mean people will line up to borrow more.
2. The best way to restore confidence in a debt-plagued system is to... issue more debt
1. At least we don't have to say 'No one knows what to do' anymore

Four that didn't make my cut:

It's been over two hundred years since we had a King, maybe we need to try that again
If you can't make people borrow, you can make their representatives borrow.
We apparently haven't been paying the banks enough fees lately
If borrowing a lot of money didn't fix the problem, maybe borrowing a whole lot more will

Posted by: pmorrisonfl | Sep 22, 2008 7:18:26 AM

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