Currencies: QE2's Done, European Debt Crisis To Take Center Stage

asiablues's picture

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paragshah12's picture

The need for Greece and other European economies to slash government spending is not some artificial imposition by the IMF or the European Union. Once investors decide that a country living beyond its means will have a hard time meeting its debt obligations, spending cuts become a reality of arithmetic.

Canucklehead's picture

QE2 is a chambered round aiming at the heart of international currency manipulation.  If the Europeans want to bail on their currency and find safety in the US dollar, so be it.  Expect QE2 to be implemented "with vigour".  Where will the exchange rate end?  Europe will be out of bullets long before the US breaks a sweat.

If China wants to "stimuate" the Yen by using the same British infrastructure that used to buy US financial instruments, expect Japan to call on the US for QE2 help, along with the Japanese equivalent of QE2.

If you are China, who are you going to call?  A dropping US dollar and Japanese Yen will cause significant domestic hardship.  It has been said that 60% of a typical Chinese pay packet goes for food.  Can the Chinese Oligarchs convince the Chinese population that they should go to financial/economic/physical war with the West?  What happens to the Oligarchs's manufacturing assets?  Do they move them inshore in the search for cheaper operating costs?  What happens to the value of the coastal infrastructure?  What about transportation costs?

I see Chinese comments today simply as steam escaping from the teapot.  Will we see a Chinese version of the tea party rise up?

robobbob's picture

"US is depressed over its 9.6% unemployment rate, just imagine Spain`s 20.5%"

Is that with or without everyones' version of the invisible U6 being counted?

apple, meet orange

Traianus Augustus's picture

The European debt crisis is a non-issue.  China will move in on each of the individual EU countries and replay their same strategy from the Greece crisis.  Go in and buy up tangible assets first.  Then buy up the govt debt using US$'s.  China has already told Portugal they are there to help.  Pretty masterful actually.  They get out of holding US$'s and buy up most of Europe. 

Rogerwilco's picture

Who needs credibility when the golden nectar of liquidity can rain down from the heavens? Rejoice, the Millennium is here!

moofph's picture

"probably due for a correction lower to the 1.30-1.35 range"

...hmnnn...something tells me it should be a bit lower than that...although i agree with most of your synopsis asianblues, it is and has been rather difficult to calculate reality these question is when the euro was trading at 1.18 against the dollar, what made it rise?...ahh, yes, sometimes the numbers appear "like magic."

asiablues's picture

Click to enlarge the euro chart. 1.18 levels back in May/June when Greek debt crisis erupted and EU, ECB, IMF et al took their time to put together and approve the bailout package.  Euro rose afterwards on Greek bailout, shaky U.S. econ, and last but not least, QE2. 

moofph's picture

...yes, i do recall...and i was being a bit facetious...there appears to be this view that the bailout served as a coordinated event, a necessary reaction, yet the drop to 1.18 was not coordinated? to me, the drop appeared as a necessary reaction...but for whom? what is to gain from the drop?...yes, yes, down conspiracy lane, i know.

reactions to data can be mislead when the cause of the data is ignored, in my opinion.

Central Wanker's picture

An interesting story about ECB's ability to exit its "stealth stimulus program".

"Ireland, whose banks borrowed 83 billion euros ($115.5 billion) from the ECB in September -- 38 percent more than a month earlier -- has seen its bonds slide for 10 consecutive days."

ECB alone is keeping Ireland alive with its liquidity program. Spain and Portugal will share Ireland's fate in a near future. How much of ECB's credibility is left then?

Orly's picture

I just worry that when we are all supposed to refocus on European debt, that we don't.  Everybody and their barber is expecting it, so it probably won't happen that way.


deez nutz's picture

While the US is depressed over its 9.6% unemployment rate, just imagine Spain`s 20.5% unemployment rate

U.S. TOTAL unemployment upward of 18 -20%.