End Of Dollar Dominance

There is now an important new addition to the list of global currency enthusiast, the Chinese Central Bank. According to the Governor the world needs a common currency managed by International Monetary Fund(IMF).

Leaders of G20 are to meet in London to discuss on the Global Economy along with it they are to discuss the new issue of Global Currency.

As in my previous post(Petro-Dollar) I have emphasised on how the US got hand on the Currency business and how the strength is going down. The report has come somewhat true.

Thats why I usually say:

"Bloggers are never WRONG".

Dollar Dominance is likely to be under threat as world economic power gets disbursed.

According to experts setting an all together new currency wont be that easy. For this to happen, all the countries will have to converge to similar levels of public debt and inflation.

To jump-start a new global reserve currency, economists say, it would require someone effectively subsidizing the cost of bringing buyers and sellers together for the time it takes the currency to get the traction.

Benefits of a global currency would be independence of countries on one separate national currency, because as USA falls the currency may weaken in global market leading to the weakening of other nations(especially Developing) for no fault of theirs.

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DESPERATE INTERCEPTION!!!

Desperate to avoid a depression like the one witnessed in 1929, the US Fed in coordination with other central banks today announced a cut in key rates to stimulate consumption and economic activity. This has been a suffix to the recent hapennings and recession type liabilities, not so true but imposed due to heavy speculation in global markets.

Who knows the markets have been slaughtered on the condition basis or due to heavy speculation and rumors of global stagnation.

Steps taken also include some Joint unprecidented(to be precise) actions and consultation such as to increase liquidity in market to reduce financial crisis.

This will have an impact on Inflation. But according to me, decline in energy and other commodity prices has reduced the upside risk of Inflation to a much greater extent.

Stats say that

The Fed has reduced the federal funds rate by 50 basis-points to 1.5 percent.

Chinese Central bank has cut interest rates for the second time in less than one month reducing it to 6.93 percent, to increase money availability in the market.

OTHER MAJOR FALLS ARE:-

The European Central Bank's main rate is now 3.75 per cent, Canada's benchmark rate fell to 2.5 per cent, Bank of England's rate dropped to 4.5 per cent and Sweden's rate declined to 4.25 per cent.

Now comes RBI's Interception....

Speculators have been discussing the slashing in interest rates as a negative impact as this is following the same trend the Fed did about 2 month ago to maintain or retain stability in Financial Markets.

The Cash Reserve Ratio (CRR) will fall to 8.5% from 11 October and the move would release about Rs20,000 crore into the financial system.

Observing the current liquidity situation in the context of global and domestic developments, it has been decided to reduce the CRR by 50 basis points to 8.5% of net demand and time liabilities (NDTL).

Thus increasing the total market liquidity to Rs90,000 crore.

Recently the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit

Speaking in Finance Minister's Language the depression will have no effect on the nation's economic stability, but stats have as usual performed differently.