HSBC Bids Farewell to Dollar Supremacy

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by Ambrose Evans-Pritchard: China
Alarmed by US Money Printing

The sun is
setting on the US dollar as the ultra-loose monetary policy of the
US Federal Reserve forces China and the vibrant economies of the
emerging world to forge a new global currency order, according to
a new report by HSBC.

"The dollar
looks awfully like sterling after the First World War," said
David Bloom, the bank’s currency chief.

"The whole
picture of risk-reward for emerging market currencies has changed.
It is not so much that they have risen to our standards, it is that
we have fallen to theirs. It used to be that sovereign risk was
mainly an emerging market issue but the events of the last year
have shown that this is no longer the case. Look at the UK –
debt is racing up to 100pc of GDP," he said

China and rising Asia have reached the point where they can no longer
keep holding down their currencies to boost exports because this
is causing mayhem to their own economies, stoking asset bubbles.
Asia’s "mercantilist mindset" of recent decades is about
to be broken by the spectre of an inflation spiral.

The policy
headache was already becoming clear in the final phase of the global
credit boom but the financial crisis temporarily masked the effect.
The pressures will return with a vengeance as these countries roar
back to life, leaving the US and other laggards of the old world
far behind.

the rest of the article

25, 2009

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