Just a few weeks ago the posturing of some the the new kids around the BRIC amplified the latest wave of rumors of demise of the greenback. Then, Masaharu Nakagawa, the shadow finance minister of Japan, added its own insult to injury envisioning his country demanding that the US issue samurai (yen-denominated) bonds! Who would have expected that the last of a long sequence of blows to the USD was to come from one of America's closest allies? (Upon closer inspection, one may surmise this was blow-back for the US continual support of the ruling LDP ...)
It didn't take long for the Japanese government to renege on the opposition's innuendos and reiterate their unshakable trust in US Treasuries. A day or two later, the communique of the G8 finance ministers from the sleepy city that lies on the tip of the Italian heel refurbishes a picture of unity in the face of the credit crisis and recession.
Surprise, surprise, this was not the end of it. In a grotesque turn of events, two Japanese men traveling with spotty documents are nabbed at the Italian-Swiss border with what looked like the steepest contraband booty of all time: US Treasuries with face value of 134+ billion USD!
The US soon confirmed that the bonds were forgeries, thereby demolishing the pipe dream of Italian authorities to reap a fine that would amount to half the country's foreign currency reserves! But speculations are rife. How can it possibly be coincidence that just as the chatter of divesting from Treasuries churns up what looks like a surreptitious maneuver to do precisely that is botched?
Once again, it looks like rumors of the US dollar demise were greatly exaggerated---and this time the rescuers were a couple of Italian border guards....
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