Dollar May Get `Crushed' as Traders Weigh Up Bailout

[marmar]

Dollar May Get `Crushed' as Traders Weigh Up Bailout (Update1)

By Bo Nielsen and Anchalee Worrachate

Sept. 22 (Bloomberg) -- 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 dollar fell against 14 of the world's most-traded currencies on Sept. 19, including the euro, as Paulson unveiled the plan, while the Standard & Poor's 500 Index rose 4 percent. The plan may end the rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists said.

Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also start a $400 billion Federal Deposit Insurance Corp. pool to insure investors in money-market funds. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=arSYa87HCb9U&refer=home

[Old and In the Way]

1. Send the bill to Grover Norquist and Phil Gramm.

Hopefully with all of those taxcuts and deregulation, they've set aside quite a nice rainy day cushon.

[snappyturtle]

2. Well, all is not lost. If the dollar totally becomes worthless we have the

Amero! :sarcasm:

[lurky]

3. Well, printing money will do that...

especially when you're talking about hundreds of billions of dollars. Funny thing, huh?

[barbtries]

4. should i invest in a wheelbarrow

to carry my cash to the store for a loaf of bread? scary times, indeed.

[Javaman]

5. this is exactly what I have been worried about...

we have a weak dollar then the fed wants to pour more money into an already dollar saturated system. I don't see how putting more money after bad is going to help things. It will further decrease the value of the dollar and technically speaking should drive the market down. Instead of pumping money into the fat ass wall street pricks pockets, that money should be put to use by setting up a works program to put people back to work. Instead of pouring more money on the fire, this would infuse the economy from the bottom up.

The days of trickle down bullshit has got to end. that's all the corporate welfare to wall street is perpetuating.

[neverforget]

6. For every action, there is an equal and opposite reaction. This is what

happens when we live on a credit card. Welcome to rising inflation AND a crashing economy.