As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis.
And, if $1.50 to the Euro is sufficient to guarantee an economic and political crisis in the Eurozone, why is $2.10 to the Pound not enough to send the British economy into a tailspin? We have met the enemy, and he is us — Pogo
Britain is far less dependent on manufacturing than some euro-zone states. sterling is falling aginst the euro and Swiss franc -- to 4 year lows viz euro, so the currency overshoot is not as extreme. sterling will fall a lot further, and that will rescue us. The problem for the Spain, Italy, Greece, et al, is that they cannot devalue. They are tied to the German-Austia-Dutch-Finish bloc, which has a much higher euro pain threshold. UK can and will slash interest rates. Club Med cannot do so until Germany is ready, which it is not... <snip> By the way, I'm not saying the eurozone is "inevitable". If Germany is willing to tolerate inflation, Club Med will be given a lifeline. I am saying that there will be a major crisis whatever.
Britain is far less dependent on manufacturing than some euro-zone states.
Britain is far more dependent on financial speculation and puffery than some Eurozone states. An economy built on funny money CDOs and junk mortgages is clearly in such a strong position at the moment.
ceebs:
sterling is falling aginst the euro and Swiss franc -- to 4 year lows viz euro, so the currency overshoot is not as extreme.
Overshoot? What overshoot? We're talking about a currency which is starting an inflationary spiral and is likely to default on some or all of its obligations within the next 5-10 years.
There is no overshoot here. If anything it's faith-based nonsense like this which is making the dollar dump too cautious.
sterling will fall a lot further, and that will rescue us.
Because that's such good news for an economy based on rickety financial scams which imports almost everything that matters.
UK can and will slash interest rates. Club Med cannot do so until Germany is ready, which it is not...
The UK can't slash interest rates without creating stagflation. A rate fix is another roll-out for the Greenspan put, and we know how well that worked for the US.
Honestly - where do they find these people? He sounds like he has genetic connections to the geniuses at the Treasury who are predicting $20/bl oil.
Even setting aside my skepticism of claims that some sort of grand crisis on a scale previously unseen is coming, I don't see an economic or political crisis arising because of exchange rates. But there is some argument to be made that Europe shouldn't rely on decoupling from the US to save it from the fallout here. The markets in Europe have been rocky, and Trichet is pumping quite a lot of money into the system. WHEEEEEEEEEEEEEEEEEEEEE!
This will be the next domino, IMHO, to fall in the developing global financial re-adjustment.
Knowing the exposure, meaning how much money has been "invested" - hahahahahahahaha! - in these things, by EU financial entities: banks, hedge funds, & etc., goes some way to allowing us to forecast the health of the EU financial sector over, say, the next 2 years.
At least that's the reason for my question. A doo run-run-run, a doo run-run
What the European macroeconomic picture will look like over the next few years is better for people like Jerome to discuss, because I'm not at all tuned-in to it. WHEEEEEEEEEEEEEEEEEEEEE!
Jerome? Migeru? You guys got anything? A doo run-run-run, a doo run-run
All of them will likely be cutting rates next year. I disagree with the idea that they'll fall below 3% in the states, but they'll be significantly lower. The question is: How much will Europe be tied up in this? WHEEEEEEEEEEEEEEEEEEEEE!
INTEREST rates are set to tumble next year in a big boost for homeowners, the Bank of England hinted yesterday. It said the UK economy would grow more slowly in 2008 -- with house price inflation slowing and consumers spending less. Governor Mervyn King also warned that continued fallout from this summer's Northern Rock credit crisis could play a part. He said: "This looks like a fairly sharp slowdown. What is difficult to judge is whether the slowing is bigger than we would have wanted." City economists said it was a clear sign that interest rates would fall from their present rate of 5.75 per cent.
INTEREST rates are set to tumble next year in a big boost for homeowners, the Bank of England hinted yesterday.
It said the UK economy would grow more slowly in 2008 -- with house price inflation slowing and consumers spending less.
Governor Mervyn King also warned that continued fallout from this summer's Northern Rock credit crisis could play a part.
He said: "This looks like a fairly sharp slowdown. What is difficult to judge is whether the slowing is bigger than we would have wanted."
City economists said it was a clear sign that interest rates would fall from their present rate of 5.75 per cent.
(And all that depends on what the definition of "is" is. Yes, I know, all very Bill Clinton.) WHEEEEEEEEEEEEEEEEEEEEE!
Now, whether this is an interested rumour by industry insiders who would gain from the market effects of the very rumour, or expect to be able to create such a climate of expectation as to force the hand of the BoE, I don't know. Everything is possible.
I really don't understand monetary theory so I don't know what I think the "right" interest rate policy should be over the next 6 months. But that's what I hear. I do think that lowering rates is just going to pour gasoline on the flames of the asset bubble. We have met the enemy, and he is us — Pogo
I don't know what the BoE's mandate says specifically. I know the Fed's, and you've told me the ECB's, but the basic premise is likely the same: Balance stable prices (stable growth in prices really) with maximum output/employment.
If I were King, I'd be very hesitant to do anything that might be equivalent to pouring gasoline on the fire in Britain. As it is, I think we're looking at one of the nastiest crashes around the globe there -- much worse than in America and countries with comparable bubbles. Average and median house prices in Britain are fast-approaching double those in America, and some indices have them already surpassing that point. WHEEEEEEEEEEEEEEEEEEEEE!
