Yes, they've tapped out the new band immediately.
Obviously, this is not good news. We'll be seeing another new band set in a day or two, IMO. The question now is, how far will it have to go. If one accepts the widely stated view that the Real was about 20% overvalued, how much additional devaluation must we allow for emotions of the marketplace? I believe that the GOB would be well advised to find the bottom quickly (and to lose the IMF).
U.S. Producer level inflation not too encouraging, as "Easy Al" may not be so prone to hit the liquidity button again. In any event, if the capital flight from Brazil is any indication, easy money has mostly gone into speculative internet stocks and consumer spending. Not where Greenspan wanted it, IMO. U.S. bank exposure to be another big problem.
Bigger picture, I see this devaluation as somewhat positive, although it surely will be painful in the short-run. The tension of fiscal misalignments needed to be addressed, and having the IMF put an expensive smiley-faced bandaid on it won't do. I'm very positive about the next decade (ala Harry S. Dent, Jr.), but have felt that we need some serious jolts first.
I'll be nibbling further if and when TBH breaches last year's lows. |
