Saturday, August 26, 2006

Russian Dumping of Dollars Accelerates

The Iguana has an interesting thought.

Cosmic Iguana:

Russians abandoned the dollar at an unprecedented rate in the first half of this year, the news agency RIA Novosti reported Central Bank deputy chairman Alexei Ulyukayev as saying Friday.

Ulyukayev told a press conference - to which foreign press weren't invited - that dollar assets held by the population had fallen by $5.1 billion in the first half of this year - three times the rate seen in the corresponding period in 2005.

'This pace can hardly increase any further,' Ulyukayev said... [*]

Countries holding significant dollar investments have long faced a dilemma. They know that their dollars are worth half of what they were 5 years ago and are depreciating fast, but they know if they dump them all at once it will start a run on the bank that will render their stockpile worthless and risk total economic collapse.

Instead they have been divesting steadily and as the article notes 'won't result in any kind of collapse'. Cool. The only loser is the American people. In 2001 dollars gas would still be $1.69 a gallon, and houses are still affordable."


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