In managing the 2008 crisis, foreign banks dependence on US dollar funding constituted a major weakness, and required the provision of large swap lines by the Federal Reserve.

Microfinance its advent, rise, and recent crises shows how.

Funding arrangements are an important part of the issue, but we should put this matter in the perspective of the overall picture.

We should not come away from these episodes thinking that expanding access to finance is bad.

Moreover, the Lebanese pound is pegged to the US dollar.

It makes sense for companies to move to where dollar sales are booming, and for asset managers to put money where GDP growth measured in dollars is fastest.

Ratification would also give us guaranteed access to funding from the European Stability Mechanism (ESM), should we ever need it.

In managing the 2008 crisis, foreign banks dependence on US dollar funding constituted a major weakness, and required the provision of large swap lines by the Federal Reserve. Addressing that flaw requires renationalization of banking, and breaking up the activities of large financial institutions.

Central banks in Asia and the Middle East have traditionally held their reserves in dollars.

We still have a long way to go, and accelerated R D to develop new drugs and vaccines can be achieved only with increased funding.

When banks borrow on the wholesale money market to finance their investments, they borrow in dollars.

This has put immense pressure on Venezuela s dollar pegged currency, the bolívar.

Against this background, the return of US investors to provide short term dollar funding for European bank debt smacks of a desperate hunt for yield that relies on European Central Bank President Mario Draghi s promise to do whatever it takes to save the euro.

We should not come away from these episodes thinking that expanding access to finance is bad. In general, expanding access is beneficial (just not before a crisis!), but finance is a powerful tool that has to be used sensibly.

It was predictable that China s currency peg would have this effect.

The dollar price of gold does not increase with the US price level.

(d) cost changes in US dollars and euros and in percentage terms between these categories and

The actual budget increase cannot be determined simply by noting a change in the dollar denominated amount.

Willingness to hold the dollar may be undercut by concern with America s twin fiscal and external deficits.

Europeans should thank the Chinese currency peg for the part it is playing in this.

Central banks still hold more than 50 of their foreign exchange reserves in dollars.

Argentina did so in 2001, when it pesofied its dollar debts.

And the value of gold does not increase in dollars to offset the fall in the value of the dollar relative to the euro or the yen.

After all, the dollar value of gold has nearly tripled since 2005.

But the commitment of these independent political entities to the euro cannot match the history of America s commitment to the dollar.

Table 7. Estimated pre tax cost of CR (coldrolled) coils ( tonne)

The big downside of the currency peg for Europe is supposed to be exports.

In the 1990 s, Argentina tied its hands with a dollar pegged currency in order to enhance its credibility as a borrower.

Figure 2. Spot export prices of HR sheet (fob Europe, US tonne)

The Spider of Finance

Funding and Resources

Funding targets

Financing

Financial situation of the Fund

Funding

The dollar price of gold does not increase with the US price level. And the value of gold does not increase in dollars to offset the fall in the value of the dollar relative to the euro or the yen.

The currency peg has also helped make the euro into an important reserve currency, rivaling the dollar.

Of course, the rate of increase of the price of oil in euros during the past year was lower than the rate of increase in dollars.

The only effect of the dollar s decline is to change the price in dollars relative to the price in euros and other currencies.

Investors around the world to want to reduce their dollar holdings for three major reasons.

The share of real growth in the main emerging countries nominal US dollar GDP growth was 20 .

Domestic and export (fob) prices for HR (hotrolled) sheets, US tonne, 1974 1999

(v) Gain loss on exchange arises from transactions conducted in currencies other than dollars (i.e. for the dollar based extrabudgetary technical cooperation activities in annex I, dollar statements) and the revaluation of assets and liabilities held in non dollar currencies.

Considering the huge risks that are not managed well, finance, even in the twenty first century, is actually still rather primitive.

The Pope of Japanese Finance