Former Fed chief Alan Greenspan says dollar peg ‘needs to go’

Detective Krum

Mentioning the abandonment of the dollar by foreign governments brought quite a few inquires.  The original article was posted here. In fact, it was former Federal Reserve Chairman Alan Greenspan who suggested to the Arab Gulf States they not peg themselves to the dollar. The original comment was made February 25, 2008 and reported by Ahmed A. Elewa, Senior Reporter of Gulf News.

The article is located here and says in part, “Abu Dhabi Floating the Gulf currencies is the best means to relieving the region’s rising inflationary pressures, former Federal Reserve Chairman Alan Greenspan said in Abu Dhabi on Monday.

The dollar peg forces the Gulf states to follow US monetary policy at a time when the Fed is cutting rates to ward off recession and Gulf economies are experiencing an unprecedented boom from oil revenues.

“It [de-pegging] is probably the most useful thing that can be done to stop the increasing influence of foreign assets on the monetary system and therefore the monetary base which is basically the major force in inflationary pressures,” Greenspan told the Abu Dhabi Corporate Leadership Forum.

Is it a wonder the news this week has shown the dollar may be on the way out for world currency pegging?