Posts by "montmorency"

http://www.zerohedge.com/article/john-taylor-schizophrenic-europe-must-read


"An independent economist calculated that the value of the euro would have to be $0.31 to balance Greeces international position, and the number for Spain was $0.34, while Germany could effectively compete in the international marketplace with a euro over $1.80. Despite the ECB pegging the refinancing rate at 1.00%, two-year benchmark government rates for Germany are way below that at 0.48%, but way above it at 7.91% for Greece, Ireland 3.37%, and 3.20% for Spain. Ireland has been living with annual deflation for the last 16 months, while German lawmakers are worried about inflation. These differences have become more dramatic in the past few months and most independent observers forecast that trend to continue. By any economists measure this is not an optimal currency zone. But the economists are not in charge, the politicians are, and these politicians have spent their entire careers following their conception of the European currency. Their reputations and the European myth depend on the survival of the euro, and those who doubt its viability are enemies who deserve to be ground into dust. There is one overarching problem that the defenders of the euro cannot overcome: in its current form, the euros survival is economically impossible. Prior to the Greek crisis, the market did not understand this, but now it does. And you cannot put the genie back in the bottle."

"If part of the euro is worth $1.80 and another part is worth $0.31, how do you value this currency today, while its still in one piece? That is the crux of the matter. The uncertainty around this issue is what has caused billions of euros to flee into the security of the Swiss franc. The Swiss authorities have intervened, buying so many euros that their reserves expanded by 45% of their GDP since the start of this year. Despite that massive intervention, the Swiss franc has climbed by 10% against the euro since mid-December. There is no sign of change. As the politicians are completely in control, the schizophrenic euro could go on for years with the economic dislocations becoming more and more intense. Little explosions are likely. Certainly, the Swiss are in a terrible position (see Switzerland Surrounded Again, April 29, 2010) as the euros will keep flowing in. The Swiss franc might gain another 10%, destroying its export base, but the Swiss could change the rules to protect themselves. Although the European political elites are totally committed to the euro, the man on the street is different. The European political peace is a compromise between entrenched elites and the highly entitled masses first formulated by Bismarck over 120 years ago. The withdrawal of those entitlements in order to save the euro could easily upset this historic deal. If those in power continue to ignore the needs of the people, neither the euro nor the current political structure will survive in its current form."

Not a pretty face, but worth listening to:
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/06/no_more_money.html

(The BBC3 programme he refers to has gone out, but can be caught for those in the UK on iPlayer).

Feeling miserable? Mark Faber will cheer you up! (Not...):
http://www.zerohedge.com/article/marc-fabers-must-watch-2010-presentation

http://www.zerohedge.com/article/fed-discuss-discount-rate-closed-june-7-meeting

I know this is the Discount rate, and not the Funds rate, but nonetheless...

This is already a bit out of date, and the usual reservations re: ZH apply, but interesting (especially the comments), all the same, re: China and the Euro:
http://www.zerohedge.com/article/pboc-replaces-snb-fx-manipulation-department