Talk Is Cheap ... and so is the Dollar

The Wall Street Journal tells us ...

G-7 Sets Aggressive Tone On the Sagging Dollar

WASHINGTON -- The world's major economic powers issued a warning to financial markets Friday that they won't sit by and watch the dollar continue to slide against other big currencies.

In a highly unusual move, Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and their counterparts from the Group of Seven nations said in a statement: "Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability."

XX My question -- how does "concern" translate into real action? The third paragraph of the story tells us ...

Currency traders scrutinize the wording of official pronouncements for the tiniest changes in inflection. By those standards, Friday's communique was blunt, even though the group stopped short of using official money to buy up dollars and push the currency upward.

The once mighty greenback has been declining against the euro since 2000. If there isn't action beyond words by the G-7 on the dollar soon, I expect its slide to become steeper and faster.

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