SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The coming US dollar crisis
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: dybdahl who wrote (1749)10/27/2007 9:32:27 AM
From: RockyBalboa  Read Replies (2) of 71456
 
Yes you are correct, the Euro rates could be much higher, like UK rates are already. The Euro has dampened the activity somewhat but more importantly prevented inflation to be imported (to some extent, and per public accouncements by the ECB). The real unsolved problem is the excessive money creation which ECB can not control and which it can not sufficiently explain:

The ECB was silently draining funds for months, in order to keep traded rates close to the 4.0% target rate.
They needed to do so because of the large commercial Euro Zone money generation (profits, continued yen and dollar conversions into the EUR) which now stands at 15% per annum.
Besides that, they emerged as buyers of USD so they may even have a loss on their book; USD buying by central banks was mentioned earlier on this thread).

When the ECB had to add back money and more, like the 100 billions market operation in August, the traded overnight money market rates dropped to 3.20% from the 4% target rate.

The problem could be solved if true inflation numbers would be made public. But this is, like in the U.S. not the case.

If it was made public the monetary growth could be better explained and "equilibrium" interest rates would be indeed higher. And why? Public perception: a +5% CPI would require borrowers to pay positive real rates and corresponding high nominal interest rates.

There s a very fine line between reporting high economic "real" growth with moderate inflation and reporting what is in fact a stagflation: growth in nominal GDPs with nearly equally high price hikes (this is what happens).
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News