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Kuwait kicks sand on the dollar

 
Anonymous Coward
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06/02/2007 04:55 PM
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Kuwait kicks sand on the dollar
Kuwait kicks sand on the dollar
Kuwait recently waved goodbye and stopped pegging its currency to the U.S. dollar. Here's why Kuwait pulled out and what the weakening dollar means to your wallet.

MSN Money

The U.S. dollar took a big hit last week. From Kuwait. On May 20, Kuwait stopped pegging its currency, the dinar, to the U.S. dollar.
You know your currency has become a 98-pound weakling when Kuwait can kick sand on it.

Even worse, Kuwait wasn't acting out of any animus toward the United States. The tiny kingdom wedged between Iraq and Saudi Arabia remains a U.S. ally. So the country wasn't trying to make any political point. It had simply become too expensive for Kuwait to keep the dinar linked to the dollar. I expect other countries, not tomorrow but soon, to take the same action. And that will be just one more milestone in the decline of the dollar.

You should care about that in the short run because a dollar declining in both price and prestige makes everything from imported goods to home mortgages more expensive in the United States.
In the long run, Kuwait's action is just one more piece of evidence that the world is increasingly working with an ad hoc monetary system where each country attempts to extract momentary advantage from exchange rates.

A careful decision
Here are the bare-bone facts. On May 20, Sheikh Salem Abdulaziz Al-Sabah, governor of the Central Bank of Kuwait, announced that his country would end the peg that linked the Kuwaiti dinar to the U.S. dollar. Up until that point, the central bank had managed the dinar, intervening in the currency markets as required, to keep its price within 3.5% of the price of the U.S. dollar. Going forward, the bank will use a basket of currencies to set the price of the dinar. According to the bank, the U.S. dollar is likely to make up about 75% of that new currency basket. In effect, the move reduces the country's exposure to the U.S. dollar by about 25%.

Kuwait's central bank didn't make this decision lightly. A small country -- even a small, rich country such as Kuwait -- faces a daunting task if it decides to go it alone in the global currency markets. Currency speculators have access to so much capital these days that they can easily overwhelm the efforts of a central bank like that of Kuwait and run the value of a currency massively higher or lower. Actually, that can happen to not-so-small countries, too. In 1992, currency traders drove the English pound down and out of the European Exchange Rate Mechanism, creating billions in profits for traders such as George Soros, who had shorted the pound.

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Anonymous Coward
User ID: 126701
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06/02/2007 05:42 PM
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Re: Kuwait kicks sand on the dollar
bump
Anonymous Coward
User ID: 241968
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06/02/2007 05:44 PM
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Re: Kuwait kicks sand on the dollar
actually they're kicking sand on a corrupt and unconstitutional Federal Reserve Note, which is a good thing for America and the real dollar, gold and silver
Anonymous Coward
User ID: 242872
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06/02/2007 06:09 PM
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Re: Kuwait kicks sand on the dollar
241968
you think much too clearly for 2007. you definitely need to get with the program , drink your flouride!
Anonymous Coward
User ID: 241968
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06/02/2007 06:21 PM
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Re: Kuwait kicks sand on the dollar
242872 lol

i'm with ya brother!
Anonymous Coward
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06/02/2007 06:54 PM
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Re: Kuwait kicks sand on the dollar
another sign of truth, where things are headed.
Rome Burning
User ID: 134590
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06/02/2007 07:07 PM
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Re: Kuwait kicks sand on the dollar
actually they're kicking sand on a corrupt and unconstitutional Federal Reserve Note, which is a good thing for America and the real dollar, gold and silver
 Quoting: Anonymous Coward 241968


Fuck the Kuwaiti's! They should have burned with Saddam! They care nothing about peace and only about their elitist status. That Federal Reserve note has defended their wealth for too long - let them fend for themselves.

This has nothing to do with anticipating the dollar collapse and everything to do with spineless corruption!





GLP