27 April 2006

Fed Chair Warns of PetroDollar Meltdown

Today's Financial Times reported on Federal Reserve Chairman Bernanke's comments to Congress:
With [Fed Chair] Ben Bernanke also warning that the scale of the US current account meant there was a “small risk of a sudden shift in sentiment that could lead to disruptive changes in the value of the dollar”, the greenback tumbled 0.6 per cent to $1.2521 to the euro and 1 per cent to $1.8013 against sterling, both seven-month lows. It also fell 0.7 per cent to Y114.01 against the yen and 0.8 per cent to SFr1.2605 versus the Swiss franc, both three-month lows, and 0.4 per cent to C$1.1230 against the Canadian dollar, a 14-year low.
The same piece also reports that, "Mr Bernanke pointed to signs of a slowing in the US housing market, adding that 'it seems reasonable to expect that economic growth will moderate towards a more sustainable pace as the year progresses.'"

Like Greenspan did for more than a decade, Bernanke is blowing smoke most of the time. But when he gives Congress this time of warning, one should really pay attention.
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