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12-01-2011 07:11 AM
That was the only word heard on the trading desk yesterday morning as the world central banks acted in concert to lower borrowing costs for dollars.
It had better work.
I think that this will have little affect. The banks have acted but now the politicians need to follow up closely behind. It wont happen. Given the chance to disappoint, politicians always do.
The move smacks of panic or is telling me that something big (and bad) is right around the corner. I want to be an optimist but cheaper dollars wont help you get out of debt. The growth expectations for EU economies are way off and over estimated. The debt simply is bigger than the GDP.
This will effect the dollar and our commodities here in the states. We need to keep an eye on dollar strength/weakness as we lurch from headline to headline.
The key word is inflation. I feel strongly that we are way way too worried about that as I think that we are following the Japanese model and the real threat is DEFLATION. Time will tell.
Corn up 3, beans up 9 and wheat up 9.
Put your seatbelts on...
12-01-2011 09:11 AM
12-01-2011 09:14 AM
Just saw this interesting analogy on the EU debt deal:
"The chief problem here is that the European banks do business in euros, but they need lots of dollars. They need dollars because they lend to American companies, and because American money-market funds put money into those European banks. The dollar is how international business is done. So usually, these European banks trade in some of their euros for dollars. But right now, they can’t do that. Because honestly -- why would you take a weak, tattered euro for a good, solid dollar? This is hurting the European banks a lot, and it could even freeze their businesses. Imagine if you went into your local grocery store and tried to buy milk by paying in yen. You wouldn’t get your milk, and you couldn’t drink your coffee, and you’d function more slowly. The European banks have the same problem. They’re trying to buy American milk with euros, and the store clerks are kicking them out."
12-01-2011 10:23 AM
I sometimes wonder if our elected officials and leaders around the World understand basic economics. We have both inflation and deflation occurring right now. Nondiscretionary items such as food and energy are inflating. The gov't tells us there is no inflation because they exclude these from the inflation equation. Some discretionary items are deflating. If inflation is the only way to reduce our burdensome debt by growing our way out of our problem, we're going about it the absolute wrong way. In order to get discretionary inflation that will create growth, we have got to find a way to deflate nondiscretionary spending. There is absolutely zero way we will deflate nondiscretionary spending as long as there is a race towards the bottom with regards to currency valuations. The lower we drop our currency value, the higher our nondiscretionary spending will go.
Instead of looking at Japan and hoping not to mimic them, I think it would be more prudent to look at their economy and wish we were there. The U.S. debt is 99% of GDP. Japan's debt is only 45% of their GDP. The news media would have everyone believe that France and Germany are the rich nations in the EU, but is this correct? France's debt is 182% of its GDP. Germany's debt is 142% of its GDP. These countries are in essence bankrupt. They look down upon Italy, but Italy's debt is only 108% of GDP.
12-01-2011 11:12 AM
reading stone data this morning. it said france and germany at 82 and 83% debt to gdp.
But I get your point.
interesting part was the list of "dominos".
"Greece debt to Gross Domestic Product is 142.8%, Italy is 119%, Belgium is 100%, Ireland is 96.2% and Portugal is 93%."
I notice that the US would be tied for third on this list.