From Krugman: This Is The Way The Euro Ends This is the way the euro ends. This is the way the euro ends. Not with a bang but with bunga-bunga. Seriously, with Italian 10-years now well above 7 percent, weâre now in territory where all the vicious circles get into gear â and European leaders seem like deer caught in the headlights. And as Martin Wolf says today, the unthinkable â a euro breakup â has become all too thinkable: A eurozone built on one-sided deflationary adjustment will fail. That seems certain. If the leaders of the eurozone insist on that policy, they will have to accept the result. Every even halfway plausible route to euro salvation now depends on a radical change in policy by the European Central Bank. Yet as John Quiggin says in todayâs Times, the ECB has instead been part of the problem. I believe that the ECB rate hike earlier this year will go down in history as a classic example of policy idiocy. We would probably still be in this mess even if the ECB hadnât raised rates, but the sheer stupidity of obsessing over inflation when the euro was obviously at risk boggles the mind. I still find it hard to believe that the euro will fail; but it seems equally hard to believe that Europe will do whatâs needed to avoid that failure. Irresistible force, meet immovable object â and watch the explosion. --------------------------------- Although there is a good deal of blood today, all it takes is one (MS, BLK, JEF, BCS) to hiccup and say oopsie daisy, we're not net neutral on the PIIGS debt. Easy way to solve the crap going on: Dump the damn gold these countries hold, have them pay off their debts, and exit the Euro. But such logic ist nein goot for zee champagne socialist fuhrers.
Say what? Just a few months ago and before that 9 months ago and then again back in October 2009 YOU and almost everyone else at ET was saying the Euro was to be the next RESERVE CURRENCY
I did a search "reserve" and no where did I say Euro was to be the reserve currency. Going back through a "Euro" search I found this: 08-16-07 04:50 PM Euro (against the dollar) looks like its crapped out since the liquidity injections by the central banks around the world. 1.38 to 1.3398 in such a nice waterfall action over the past week. Me thinks this is more a reflection in confidence of the dollar vs the Euro in crisis situations going on now. Anything dramatic going on tradewise to create such a waterfall? If this subprime mess were to exacerbate or continue on, then I think we hit bottom in the dollar. ------------ Damn kiddies, I don't think anyone who would advocate calling a euro a reserve currency would've written that 4 years ago! And as history shows, subprime did hit the fan and the dollar rocketed.
Carney made headlines yesterday (in Canada at least) saying that the world needs more liquidity. And here I thought we were awash already. Maybe Draghi will acquiesce and print, in which case the Euro is a good short here, but I wouldn't do so until after Bernanke's speech tomorrow. Ben may beat Mario to the punch.
When Bernanke initiated QE I, everybody had understanding for the dire situation. When he initiated QE II, he earned harsh criticism (including me). Meanwhile, I have changed my mind and must admit he did the right thing. The European "braniacs", with Germany at the forefront of deadly austerity measures will wish in 3 years time they had a Ben Bernanke at their helm.
I quote everything, in the past 10 years Germans-ECB bankers did everything wrong, my god how can they be so incompetent ! in 2003-2008 they let M3 explode in 2008 they raised rates because of inflationary ghosts only they were seeing ! in 2011 they did it again !!!! and now that we risk deflation 1929 style, they want more of it ! But now I'm wondering: are they plainly incompetent, or are they doing it on purpose ?