The right-wing's favorite bogeyman, George Soros, made his billions by betting against the British pound, making the Bank of England fight for the survival of its treasury (the event is also known as the "Rape of the old lady on Threadneedle Street)
Now, both the British Pound and Euro are at a new high against the dollar. Robert Kuttner writes in the Boston Globe:
The dollar just hit a 20-month low against the euro. It now costs $1.32 to buy one euro, and the dollar is falling against other currencies as well.
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If any other country ran such a deficit, foreigners would lose confidence and its currency would crash. That's what happened to Mexico, Argentina, even to Britain in the early 1990s. The United States has avoided that fate thus far, because Asian central banks keep the dollar propped up, and that reassures private investors.
But this game can go on only so long. This past week's decline of the dollar against the euro is rather like the seismic tremors that precede a major earthquake on a fault line. We don't know whether this is the big one. We just know that the big one is coming sooner or later.
No less than former Federal Reserve chairman Paul Volcker put the odds of a dollar crash at 75 percent within five years. He said that more than two years ago.
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The precarious dollar is also weakened by the big federal budget deficits and the increasing role of hedge funds, which operate like a herd and exaggerate normal swings in currency markets. But Paulson wants even more tax cuts and more financial deregulation.
The dollar dilemma is the Republicans' economic Iraq. It has no easy solution, and could be one more disaster on the watch of George W. Bush.
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