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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (66960)	8/7/2005 10:33:50 AM
From: shades	Read Replies (1) \| Respond to of 74559

You must remember unlike us poor millionaires, the very rich and powerful have behavioral analysts to see when folks like you and me will panic - they catch us short the GOOG and the USD analyzing our thought processes and emotional reactions. THen when they have sucked all the people in they can, and everyone is tired and walks away in disgust - only then do the powers that be let rational nature take its course. Now Mr. Benson said the arab boys will take our dollars because they don't want shock and awe bush toppling some more regimes. Of course talk like below should have bush and daddy shaking in thier boots - ungrateful arabs - who was there many decades ago to take them from desert people to where they are today - not asia or europe - it was the american cowboy - who saved them from Iraq and saddam - the US tank and bomb - recently who did russia call to save thier sub - it wasn't red china - hehe - ingrates. Anyways the chances of an arab repeg before 2010 - what are your odds? Some don't think change can come like a thief in the night, but I saw bush take from gore and change this world fast - hehe. If I was a cowboy wanting to hold my power - I would need some doubt in china and europe so that the arab boys would feel safe holding my paper and not thiers - got to stir the cows up a little you know - get em spooked. signonsandiego.com By Dominic Evans REUTERS 12:23 a.m. August 2, 2005 RIYADH – China's revaluation of the yuan is fuelling debate in Gulf Arab states about the wisdom of fixing their currencies to a weak U.S. dollar while trading links with Asia and Europe continue to grow. Oil giant Saudi Arabia and most of its neighbours have pegged their currencies to the dollar for years, a policy which helped anchor their young and fragile economies through the turbulence of low crude prices in the late 1980s and the 1990s. Officials insist they want to preserve a link which has served them well in the past – at least until the planned monetary union of six Gulf Arab states in 2010 – and few analysts expect any quick change. But the weakness in recent years of the dollar and the growth in Asian and European imports have cut into the purchasing power of the Gulf countries, whose export earnings from oil are also denominated in dollars. The value of Gulf Arab imports from China, which were negligible just a decade ago, grew last year to $14.5 billion, or 8.5 percent of total imports. While record oil prices may mask the impact of costlier goods, economists say the case for linking to a basket of currencies instead of the dollar – just like China – is gaining ground. "There is a gathering debate about this," said Daniel Hanna, an economist with Standard Chartered bank in Dubai. "The majority of the Gulf trade is with Asia and the European Union. You can make a case that the currency peg should reflect that better, especially since China will be their fastest growing partner," he said. One vocal advocate of swift change, National Commercial Bank senior economist Nahed Taher, says Saudi Arabia cannot afford to wait until 2010 to loosen ties between the riyal (SAR-) and the dollar which have been fixed since 1987. Taher has called for a managed float of the riyal against a basket of currencies, within a 5 percent band, arguing that costlier imports are partly responsible for pushing annual inflation up to 6 percent for the last two years. Other economists dispute Taher's figures, and the Saudi Arabian Monetary Agency says inflation is less than 1 percent. But with oil prices set to remain high for the foreseeable future and the region witnessing its fastest growth since the 1970s oil boom, policy makers in the Gulf may chafe at the limited room for manoeuvre which a tight currency peg imposes. Hanna said Qatar and the United Arab Emirates in particular are already suffering inflationary pressure which would be easier to tackle with a more flexible monetary policy. BARRIERS TO CHANGE The six states of the Gulf Cooperation Council – Saudi Arabia, Oman, Bahrain, Qatar, Kuwait and the United Arab Emirates – control more than half of global oil reserves. Supporters of the dollar link say that since oil is priced in dollars, any change would introduce a new foreign exchange risk for governments who depend for nearly all their revenues on crude exports. Regional politics also make any early move unlikely. Although most GCC states have informally linked their currencies to the dollar for years, they only formalised that step as a group in 2002 when Kuwait switched to the dollar from a basket of currencies. Abandoning their joint position could undermine credibility of the GCC's goal of monetary union within five years. "We've just agreed to a formal peg ... It is too soon after that to change," said Abdel Aziz Aluwaisheg, director of the GCC Secretariat's economic integration department. "There is a realisation that we are losing because of pegging to the dollar but there is also a feeling that this (reluctance to change so soon) is a big obstacle – as well as the issue of foreign exchange risk." Aluwaisheg said Gulf officials have discussed informally whether any change should happen before 2010, but that no formal proposals have been presented by any of the six countries. Expressing his personal view, Aluwaisheg said he believed the time had come to start thinking about changing the peg "even before the unification of the currency." "But obviously if it is done, it has to be done jointly. The whole idea of dollar peg is to have irrevocable cross exchange rates between the six Gulf currencies before they are unified." Abandoning the dollar peg, which helped curb double-digit inflation in Saudi Arabia in the 1980s, for a basket of currencies was not without risk, he added. Any change may be a remote prospect for now. Central bank governors talk openly about the post-2010 options for their unified currency – either fully or partially floating or pegged to the dollar, the euro or a basket of currencies. But they insist the dollar peg stays until then. Earlier this month, Saudi Arabia's deputy central bank governor Mohammad Al-Jasser denied a British newspaper report that Gulf countries were reviewing the dollar link. Hanna said big changes are unlikely before the new currency is born but some fine-tuning may occur before then if the dollar slips further. Kuwait, for example, quietly tweaked the rate on its dinar in January in a move which drew little attention. "By no means are we saying that this will change tomorrow," Hanna said.