Word: dollarization
(lookup in dictionary)
(lookup stats)
Dates: during 1980-1989
Sort By: most recent first
(reverse)
...renewed volatility in currency values was unsettling because such gyrations make it difficult for international businessmen to negotiate a loan or sales contract, or even to project the cost of a company payroll. The bulk of international transactions is made in dollars, and an unstable currency makes all planning difficult. Moreover, some experts wondered if the new situation of a strengthening dollar would quickly be followed by a weakening of the U.S. currency. But Italian Economist Luigi Spaventa challenges this view, arguing: "The underlying causes appear to be far stronger than in previous cycles of the dollar...
...least some of the dollar's appeal and gold's weakness is coming from what European bankers are calling the "Reagan euphoria." Just as the value of the dollar fell because world moneymen did not believe that Jimmy Carter was serious about battling inflation, it is now rising because the new Administration looks more determined. Said Beryl Sprinkel, the Under Secretary of the Treasury-designate for Monetary Affairs: "We're getting on top of this inflation problem, and the markets are beginning to believe...
Much of the dollar's recent strength is attributable to something the President has little direct control over: steep interest rates. At present levels of 17.5% for three-month deposits, American banks are paying interest rates far above the U.S.'s 13% inflation rate. The interest rate in West Germany is only around 9%, while in Japan it is about 8%. The high level of real return attracts many international investors to deposit their money in the U.S., thus strengthening the value of the dollar...
...sold in the form of futures contracts. When interest rates climbed last autumn, speculators borrowed heavily from commodities brokers and banks to buy gold futures, believing that once interest rates peaked they would plunge quickly, as happened last spring. That would have sent gold still higher and hammered the dollar. Interest rates did peak in January, but they are now dropping far more slowly than expected. Many speculators have been unable to finance their loans and are being forced to sell futures contracts at a loss, which drives the price down further...
...currency confusion is being aggravated by a host of local problems. West Germany's deutsche mark is suffering from both a strong dollar and a West German economy that is slipping into recession. Moreover, the Bonn government and West German banks are major lenders to Poland and would lose upward of $5 billion if that economically troubled nation defaulted on its loans. In this world turned upside down, the two strongest currencies are the Japanese yen and the British pound. Both have risen dramatically against the DM as well as the dollar, but for different reasons. With 2% unemployment...