Posted on 09 November 2008
Rebound in European Shares Eases Risk Aversion Fears
On Friday (Nov. 7th) the dollar slipped against other major currencies as a rebound in European share prices eased risk aversion fears. Many investors took advantage of Forex opportunities and sold off dollars and the low-yielding yen and bought into riskier currencies, including higher-yielding currencies such as the Euro and the Pound.
Signs Of a Recession
European data released Friday pointed to a prolonged global economic slowdown which will make investors wary of taking risks. German industrial production fell to a 14 year low and figures from the US are expected to show signs of a deepening recession. Investors usually flock to the dollar in times of trouble and these fears are in part responsible for the dollars surprising performance on Forex markets.
Read the full story
Posted on 20 October 2008
The Original Conference
In 1944 in the sleepy New Hampshire town of Bretton Woods 730 delegates from allied nations met to discuss and set world monetary policy. Previous to the meeting economic policies were determined by a myriad of individual, and often conflicting, treaties and trade agreements and progress was often hampered by tradition. During the great depression inflation made the currencies of many countries worthless which only exacerbated the effects of the global depression. The intent of the conference was to rebuild the world monetary system with some semblance of predictability and security.
IMF Established
The conference was the beginning of the International Monetary Fund which was to set monetary policy for decades to come. The nations involved agreed to allow free markets to work with minimal government intervention, limit trade barriers, and accept the intervention of the IMF to regulate the finances of member nations. Many nations involved would have preferred more regulation of markets and state intervention in their respective economies but the devastation of the war prompted the signing of the Bretton Woods agreement. The US demanded, and got, a leadership role in the IMF.
Read the full story
Posted on 01 October 2008
Effects of the Current Crisis
The current financial crisis will affect many aspects of the life of the average person in the foreseeable future. Investors will see shrinking portfolios, job prospects will dim, and retirement funds will dwindle. Credit markets will freeze; small businesses will feel the pinch and many will see their net worth diminish.
The Financial Crisis and US Leadership
The financial crisis may also have an unforeseen effect-the limitation of the US to exert a leadership role in world affairs. Since World War Two the US has been the most powerful nation militarily but just as important is the reputation of the US as a financial powerhouse. New York has long been considered the world’s financial center. The status of the US dollar as the world’s dominant currency gave it special powers and privileges. “The dollar’s status as a reserve currency … has given the U.S. a privileged measure of economic stability relative to its rivals,” said journalist Sebastian Mallaby, of the Council on Foreign Relations. “It has allowed the U.S. to project power abroad, too.”
Read the full story
