Many speak of inflation fears in the developed world. How can this happen, except of course absolute currency crash, when Russia and China's ppp's are almost off the scales? Euroland should have no fears of inflation in such a world and I would suggest buying time and their own survival by selling the Euro massively to defend against its rise. Of course this is only a short term band aid, but it would give the world time to come to its senses to reform the international financial architecture once again to sanity. If it is not reformed soon Russia's and China's deflationary realities will definitely eat us all alive. China could easily hyper-inflate with all the excess liquidity in this unbalanced ppp world - then what? If not Euroland, with its rising currency, is going to be stuffed full of China goods and a possible severe deflation. Now it may not be importing as much from China as America but it is importing from us and the big rigs are gearing up to ship from ship to ship across this nation[America] and straight to Euroland. Arbitrage will assure this.
It is high time everyone in the world starts to see these glaring economic ppp realities. People may accuse me of crying wolf, but what does it take for people to understand these simple dynamics?
Gold, stocks and '70s Lite
Chris Temple is editor of The National Investor newsletter and founder of The Foundation for American Renewal.
At long last, we’ve recently heard cries of “Uncle” from some quarters where the U.S. dollar’s relentless decline—and the corresponding increase in other currencies—is concerned. As a result, there have been some significant market developments over the last several days. They are not ones likely to change the many longer-term trends that have become evident over the last year or two. However, these changes have been affecting many investors, especially those who were unprepared for them.
On the currency front, the highest-profile grumbling has been coming from the European Central Bank, whose currency has been the most prominent gainer among the major ones versus the greenback. On Monday, the dollar’s decline against Europe’s common currency reached new lows of over $1.29 per euro. Then, new E.C.B. President Jean-Claude Trichet publicly expressed concern for the first time over the “brutal” rise in the euro’s value, one which has hurt exports from the eurozone and threatened its fragile recovery.
As a result, we’re finally seeing an overdue correction in the euro’s ascent, together with a commensurate respite for the dollar, now that at least someone in such a position has decided to fire a shot across currency traders’ bows. Today, we’ve dropped back to just below $1.26 per euro. What’s been interesting about the currency markets, though, is that the dollar has NOT enjoyed similar rebounds against most other currencies. Against the yen, in fact, it has hit another new low this week below 106 yen before bouncing; and this in spite of yet more Bank of Japan intervention.
The dollar-versus-euro move is far from evidence of any renewed confidence in the U.S. currency. In fact, that the dollar has not rallied much yet against other currencies is evidence that traders still have no love for America’s scrip. However, part of the Federal Reserve’s present plan—which I’ll be exploring in The National Investor in the not-too-distant future—is to actually lead the world in “competitively devaluing” its currencies. Greenspan and Company know that they can’t be the only ones keeping interest rates at puny levels, and are trying to force other countries now to actually cut interest rates further, so as to have the best hopes of keeping the global economy grinding ahead. Few fully grasp, in fact, that the big worldwide trend in prices is in transition; it’s moving from one dominated by China’s purported exporting of deflation, to one where America will seek to export inflation. ...Continued
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