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S the writing on the wall for the dollar? Researchers at one big fund manager say it is, but the markets haven't read along just yet.
Since the start of March, Bridgewater Associates, a manager of more than $100 billion of institutional and hedge fund money in Westport, Conn., has been issuing warnings in its daily reports. One on March 11, titled "The Breakdown of the Dollar System," said, "As we often say, we've seen this movie many times and we know the ending."
There is indeed a volatile blend of risks surrounding the dollar. President Bush's new budget proposal would substantially expand the government's debt burden in the next decade, potentially raising doubts about the desirability of its i.o.u.'s. Some Asian central banks have declared that they will diversify their reserves away from dollar-denominated assets. If China decouples the yuan from the dollar, it will not need as many dollar-denominated assets to keep its currency from gaining value, nor will its competitors for export markets. In recent times, long-term interest rates have stayed stubbornly low, making it difficult for American companies to attract new investment from abroad.
www.nytimes.com
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