any answer on euro and world currency has to include politics
I hate politics, hate discussing it, but have some views
the owner of the world currency reserve has more liberal ability to abuse that position, and issue more debt, which would be sure to be gobbled up
the USA has fallen victim to that temptation in a massive way
we now sell cars, furniture, plasma TV's, even homes, with almost no money down payments
the world reserve currency has enabled us to destroy our economic and financial system
it will never recovery, except for brief bouts of apparent health
the real story with world reserve currency is political
watch what happens to the USA, its president, its Congress, and its Military as the USDollar steadily slides into FOREX quicksand
watch what happens to the USEconomy if & when the US$ slide is accompanied by the USTBonds crawling slowly into the Liquidity Trap, from which there is no exit
as the US$ slides, as the USTBond yield drops further, the geopolitical hegemon loses his legs and weakens
as the EURO takes the mantle as leading world currency, the EU leaders will be consulted first, not the US President
we will be too busy fighting fires at home, might even call back military troops abroad since adventures to seize lands and resources will become too expensive
other world leaders will suck up to EU leaders, trying to please them
they will appeal to EU leaders for foreign aid, which can be simply printed in new EuroBonds
all will curry favor to the EU
a new and dangerous financial alliance (for the US$) has emerged
the Arab PetroDollars are fast converting to Euros
if this trend continues, then the Euro as world currency will accelerate in movement
Americans are clueless as to such implications
vast contracts will go to European firms, since small savings come about from sidestepped currency conversions
this is worth watching also
owning the strongest and most robust currency comes with a price
it is the fiat currency backlash from Mother Nature
- domestic industry falters, as export business weakens
- wealth generation migrates from real economy to financial economy (surreal, unreal, bogus)
- debts rise domestically since wealth drops but appetite for goods and the good life continue
- travel to Europe will get expensive as hell, hurting resort businesses
- travel from Europe will get cheap as hell, thus spawning a new age of "Ugly European" if they toss their weight around
(they have a long way to go to catch up to American Obesity)
it will be very interesting to see how Europe responds
will Chinese imports invade and decimate domestic industries?
will consumption rise as imports get cheaper?
will savings disappear as their stock markets rise?
will debts rise as they did in the USA?
will the real economy fade away?
will Europeans use the benefits to build new industries whose capital investment will cost less, like with stateofart technology equipment?
e.g. biotech, nanotech, new energy (fuelcell)
or will Europeans squander the opportunity (as US did) and turn to consumption addictions?
TIME WILL TELL
TO WHAT EXTENT WILL EUROPE TURN TO FINANCIAL ENGINEERING?
that is another key question to me
financial engineering is the self-mutilating skill learned and developed by the fiat winner
the next few years will be the most volatile in modern history, since VietNam
I will be watching G-7 shifts,
where ECB might take over from our absurdly goony Secy Snow
the guy is a worldwide nitwit
ECB head Trichet moves the FOREX markets now
far more than Snow or Greenspasm
/ jim |
