Ander's Market Theories

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Bailout Plan Threat to Dollar ?
Posted by Barry Ritholtz on 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.

Excerpt:

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 . . .


Source:
Dollar May Get `Crushed' as Traders Weigh Up Bailout
Bo Nielsen and Anchalee Worrachate
Bloomberg, September 22, 2008
http://bloomberg.com/apps/news?pid=20601087&sid=arSYa87HCb9U&