Time to halt the pound's decline more like!!!

Paul, Coventry,

I accept your analysis of the current situation, and a collapse of the dollar would be bad for everyone, but what is the solution? What kind of worldwide coordinated intervention can turn things around?

Dara, Dublin,

The unspoken policy of the United States Fed and treasury department is to drive the dollar down as a way to boost exports which are uncompetitive due to higher cost base and for not being appealing to the people in other countries.

The weak dollar policy is at par with euro area as to undervalued Chinese reminbi is to the United States. Both practices need to be halted and treated as unfair trade policies.

Max Skinner, London, UK

Why the Euro?
What else do you do?

Euro rates have been, although low, at least steady, and the ECB has managed to make people believe they will stay as is.
Rubbish of course, but it presents a conundrum, what else do you do?

Expect the £ to keep falling to protect our exports.
Expect inflation to keep rising.

The ECB will either join us on the crash, possibly waiting till we reach parity, but I doubt it, or they'll maintain there inflation hawk stance until every business in the EuroZone has packed its bags.

Dominic, Manchetser, UK

Lower interest rate won't help a crisis caused by cheap credit.

Part of the explanation for the current crisis is cheap credit, which led to a housing bubble, with led to a lot of people refinancing their house and buying stuff (fuelling the comsumer spending spree in recent years). It all depended on a continued rise in home prices. It seems pretty obvious that this mechanism could not continue indefinitely. It's like a pyramid scheme.

This being the case, lowering interest rates will at best delay the pain that will have to be endured, at worst aggravate it.

Then there's the position of the US dollar. In any other country, the currency would plunge quite rapidly if the economy depended to a large degree on credit-based consumer spending and there were permanent trade and budget deficits. The USD has indeed fallen, but no so far, because it has been protected by its status as a reserve currency and international trade currency (notably for oil and other commodities). It is probably still artificially high. In fact, some point to China and Middle Eastern countries buying US government bonds and other dollar assets as one of the causes of the housing bubble and subsequent credit crunch: it represented free money pouring into the US economy.

It's quite a bit like the Inca and Aztec gold flowing into 16th century Spain, and I suspect it will have a similar effect on the US economy, and perhaps in the long run, on the status of US as a superpower.

If the world's central banks and large institutional investors decide they no longer dare to hold on to dollar assets shrinking in value, and more oil countries than Venezuela and Iran demand oil to be paid in Euros, there's no limit to how ugly things can get.

Haavard Pettersen, Oslo, Norway

James in Florida, you are spot on. Lowering interest rates in a heavily indebted economy is like prescribing whisky for an alcoholic. The Fed should never have engaged in rate slashing in the first place and the BoE should certainly not follow suit.

Paul, Coventry,

Lawrence, London,
Point taken, but I'm still trying to get an answer to my original question why the continual drop against the Euro? Europe's economy is in no better shape (than the UK's) either.

Thomas, Alicante, Spain

Greed in all things has lead to where the United States and the world are at today. The never ending drive to push everything up for an excessive profit (stocks, real estate, commodities, etc) and make vast sums of money over night. What is happening today in the financial markets should come as no suprise to anyone. There is no profit in being greedy.

Chronos, Fort Smith , United States, AR

The problem was caused by setting interest rates too low for too long - it will not be cured by repeating the same mistake.
In fact at this stage it will only make matters so much worse.
Strange and perverse as it may seem the solution is to raise inerest rates not lower them in order to let money regain value again and enable future interest rate movements to regain traction.
Failure to do this will cause a major problem

James, Tampa, Florida

There is a defening silence of expert comment on the rise of the Euro. The main economies are at best fragile to the extreem, yet the Euro surges ahead. Please explain to me why it will not collapse as they can not sell anything at the price of the Euro. That would leave their embrios of awakening economy DEAD.

michael, Menorca , Spain

@Richard, Suffield, CT, USA

The money never actually existed Richard. The major private "national" banks all over the world long ago gave themselves the criminal power of fractional reserve banking. This gives a bank the power to loan out 10 times as much money as they actually have available in the bank. They print the paper dollars to represent this imaginary stockpile of wealth that they lead all the customers to believe they actually posses. It's a 400 year old con started by money changers/gold traders in Germany. See the complete history by watching the film, "The Money Masters" on Google. Then write your congressman to close the private Federal Reserve Bank, and give the Treasury department the power to create and control the American dollar.

victor compton, Cherbourg, France

Thomas, I don't know which economists you have been reading but the statement that "as we are continually being told by all economists of all hues [that the UK] is in better shape than any other nation to weather the current financial climate." is simply laughable. I haven't read anything positive about the UK economy since the Northern Rock crisis. Your words seem to come straight from the mouth of Alistair Darling but surely you don't count him as an 'economist'?

Lawrence, London, England

I am wondering where the money from Bear-Sterns investment bank went? Did it get skimmed off to some rich man's account who is living in a tax haven outside of the USA? Let's see a full and complete accounting of every dollar that bank lost. Why should the Federal Reserve bank be allowed to pay off the Bear-Sterns debt with out an act of Congress? I thought Bear-Sterns was a private investment banking company? I think the whole system is becomming very crooked. It seems to me that the rich investment bankers have found a very profitable way of skimming off the money and then crying poor, demanding that the U.S. taxpayers pay off their losses via the Federal reserve bank. I am only a small hard working American writing here, but I am sick of this. The rich get richer and my retirement gets further and further away every day!

Richard, Suffield, CT, USA

A lucid presentation, very welcome at this time. I am pleased with Mr. Ducan's concluding admonition. Yes, let the US get together with Europe & Japan & get things settled properly. I am one elderly American more fearful of inflation than of a crash.

Ernest Werner, Trumansburg NY , USA

At least the Feds got their fingers out and actually did something (in one weekend).

Can't say the same for our BoE-Downing Street tag-team, can we?

Osei K., London,

While I agree with the above analysis I have a more immediate concern of the continuing fall of the £ against the Euro. The slow decline has has been going on for months, and truthfully I cannot comprehend a valid reason for it. The Euro gaining on the US Dollar, yes I can see the cause as the US economy falters but the £ vs. Euro, no obvious cause to me. The Euro zone has not suddenly turned into a rising economy with a burgeoning manufacturing base and the UK, as we are continually being told by all economists of all hues, is in better shape than any other nation to weather the current financial climate.
Without being a conspiracy theorist, and I have wondered this for quite a while now, is the current government slowly omitting to talk-up the strength of the £ vs. Euro in the hope that when it drops close to parity, they will declare to the UK electorate that we would be just as well off to be in the Euro?
Can someone out there please enlighten me.

Thomas, Alicante, Spain