Posted on 02/26/2008 8:06:25 AM PST by bjs1779
The Gulf states' dollar pegs restrict their ability to draw out monetary policy suiting domestic economic condition, independent of the US policy stance, the former FOMC Chairman Alan Greenspan said Monday in Jeddah, Saudi Arabia.
Most gulf states are experiencing record high of inflation, with Qatar reporting a 14% surge last year, followed by the UAE, Kuwait and other countries. Saudi Arabia's inflation hit a twenty seven year high of 7% in January, while UAE's inflation topped 9.3% in nineteen years during the month. The regional inflation average hit 6.3% in 2007, compared to 0.3% in 2001, according to Merrill Lynch & Co.
With the dollar's weakness, the GCC countries have experienced a sustained depreciation of their real effective exchange rates and an increase in imported inflation.
Greenspan said if these countries choose to drop their dollar pegs, the inflation in the region would fall “significantly.” Gulf governments should consider the idea of floating their currencies assessing its implication in the long-term, Greenspan said.
However Saudi and UAE central bank chiefs spoke in favor of retaining dollar pegs, while Qatar's prime minister advocated for regional currency reform to avert possible unilateral revaluations. According to Saudi Central Bank Governor Hamad Saud Al Sayyari, floating the Saudi riyal would not be appropriate as the country relies on oil exports. He said floating is beneficial when the economy and exports are diversified.
According to UAE Central Bank Governor Sultan Nasser Al Suweidi, Dollar pegs were helping Gulf States attract foreign investments. However, he favored the view that the Gulf governments should consider the implication of currency floating in the long-term.
Of course he doesn’t. He already has enough dollars that it doesn’t matter to him and he can live out his old, decrepit days with his liberal wife.
Geez, thanks Allan. That should help. How many millions did they pay you?
Mumbles Mouth does it again.
from the Greenspan Wikipedia page....
Greenspan and Objectivism
Greenspan was initially a logical positivist[10][citation needed] but was converted to Objectivism by Nathaniel Branden. During the 1950s and ‘60s Greenspan was a proponent of Ayn Rand’s philosophy, writing articles for Objectivist newsletters and contributing several essays for Rand’s 1966 book Capitalism: the Unknown Ideal including an essay supporting the gold standard.[11] [12]
During the 1950s, Greenspan was one of the members of Ayn Rand’s inner circle, the Ayn Rand Collective, who read Atlas Shrugged while it was being written. Rand nicknamed Greenspan “the undertaker” because of his penchant for dark clothing and reserved demeanor. Although Greenspan continues to advocate laissez-faire capitalism,[13] some Objectivists find his support for a gold standard somewhat ironic given the Federal Reserve’s role in America’s fiat money system and endogenous inflation. He has come under criticism from Harry Binswanger,[14] who believes his actions while at work for the Federal Reserve and his publicly expressed opinions on other issues show abandonment of Objectivist and free market principles. However, when questioned in relation to this, he has said that in a democratic society individuals have to make compromises with each other over conflicting ideas of how money should be handled. He said he himself had to make such compromises, because he actually believes that “we did extremely well” without a central bank and with a gold standard.[15]
Greenspan and Rand maintained a close relationship until her death in 1982.[5]
So is it Alan the Central Banker or Alan the Randian speaking?
We essentially have two Fed Chiefs now. Just like former Presidents need to STFU, so too does Greenspan. If he wanted to stay in the conversation, he should have asked to be reappointed.
Nailed it.
We are exporting a lot of our inflation but I’d say the 4.5% the government list in the last year is close to accurate on average (they have energy up 20%).
It says they import more from Europe than we do.
Since they are pegged to the dollar, the price of American goods isn't likely increasing that much for them.
I doubt the cost of Chinese goods is increasing greatly for them.
So they must be importing from nations who's currency is much stronger than the the dollar is now.
Rather than having high inflation from buying eurocrap, they should buy more from the US.
Greenspan should just shut up.
Our inflation is really low because we don't eat food or use energy. Even if we do use energy, we do not experience the high costs.
When you hedonically adjust the energy prices for the environmental benefits of government induced price distortions it turns out we enjoy being screwed by our government so much, it actually does not hurt.
But, if inflation in the area were to fall, would they still feel the need to drive oil prices up? If so, the continued influx of cash would, eventually, fuel inflation again.
Good point. Alan was probably thinking of a short term fix, as all fiat people do.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.