A crashing Yen failed to help Japan or fix its economy, but while Japan may now be a lost cause, the Keynesian masterminds of the world will give it another try, and following today's Draghi's announcement, the EURUSD has crashed to the lowest level since 2003, tumbling over 200 pips, and printing below 1.14 moments ago.
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And since it is a zero-trade sum world, now that the exports of Europe - the single largest economic block in the world - are cheap enough to compete with Japan's just as cheap, thanks to currency debasement, goods and services in the global arena, it means that the biggest loser is obvious: the United States, whose currency has soared to nosebleed levels on expectations that the Fed will hike and that the US will somehow decouple from a world that is drowning in economic malaise.
However, in a clear indication that the party for the USD-bulls may be ending, none other than the US commerce secretary moments ago said the impact of a rising dollar on exports and economic growth bears monitoring.
According to Bloomberg [10], asked at the World Economic Forum’s annual meeting in Davos, Switzerland, whether a climbing greenback could drag down U.S. trade and economic expansion, Pritzker said “it’s a factor and something to keep an eye on.”
Pritzker said the challenge was to ensure U.S. businesses could be innovative and productive enough to attract demand regardless of the vagaries of currencies or the world economy.
Yes: it is a challenge when increasingly troubled importers could care less about innovation when the only thing that matters is the local currency denominated bottom line.
And this is something Pritzker knows too well. So the question is - how long until she speaks to none other than Jack Lew, who in turn convews a message to Janet Yellen, forcing her to "patiently" remind the market that the US never has, and never will, decouple from the rest of the world, and that unless the US wants to go straight from 5% Obamacare-boosted "growth" to recession, it too will have to join the devaluation party.
Lastly, considering the everyone is now long the dollar, the macro devastation that would result if the Fed also pulls an SNB and surprises the market, will be one for the generations.
