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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7740)	2/11/2004 4:01:09 PM
From: westpacific	Read Replies (3) \| Respond to of 110194

DISAGREE>>>>>>>BIG TIME - I live in Europe, do you. Economy is rocking, house prices rocking, no need to cut! I see and hear what is going on day to day. Things are just fine in Euroland and getting better. Relations to China going to continue pipeline of products.

To: mishedlo who wrote (7740)	2/11/2004 4:18:03 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 110194

Mish, I liked your logic on the European rate cut, but I am not sure it will happen very soon. NOTE: I am trying to be dispassionate about this and figure it out - and I'm thinking as I type. Most of Asia is pegged to the dollar (China is fixed, but the other currencies are close to being fixed). Oil is pegged to the Euro (yes, it trades in Dollars, but OPEC has essentially fixed it to the Euro). This is a currency disaster waiting to happen. All the talk about "flexible" currencies, is just that, talk. For EZ, the price of oil has not risen and the price of foreign labor (i.e. Asia) has dropped. Their only problem is exports to the U.S. That sounds like rising unemployment and deflation in Europe. How do you fight unemployment and deflation? Cut Rates. The alternative is to have the US raise rates! ... now there is the rub. I think everyone is buying into Greenspan's view, that the US economy is gaining steam. Therefore they think the US will raise rates (maybe this summer or fall) and take some of the pressure off the dollar. I guess that is why I think the Euro will wait to cut ... Of course, I think they (Greenspan and Euro Central Bankers) are wrong, and the US economy will start to weaken. Then EZ will have to cut rates, but that may be later this year. Just thinking out loud (so to speak) Best to you.