Silicon Investor (SI) -- The First Internet Community

STOCKTALK

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 -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (10899)	9/9/2008 6:03:25 PM
From: RockyBalboa	Read Replies (7) \| Respond to of 71454

Here is a comparison of the recent US and European developments: USA: The USA has a low interest rate level, a normal yield curve and modest inflation. Given the low fed fund rate the Fed has lots of leeway to hike rates if they are required to do so. Just 2 larger banks (Bear Stearns, Indymac) and a handful regional banks have been lost to the credit crisis. Most of the credit losses are disclosed and the affected banks have placed stock to restore equity. The dollar is on an uptrend and inflation from raw materials no longer an issue. GDP growth is 3.3% and there are early indications of job creation in August. One could say, the Fed under Ben Bernanke has done a very good job steering around the economic difficulties of 2007. Europe: In Europe rates were on average rising and a high overall level in short term rates, over 4.25% was maintained most of the time resulting in mostly inverted yield curves. Despite the tight monetary conditions and a very high EUR valuation until recently, inflation rose to 4%, while growth turned to 0.0% in Great Britain and negative in Europe. Despite there was no subprime-housing crisis, 2 larger banks have been lost (Northern Rock, IKB Bank) and other banks disclosed large losses not (explicitly) related to credit. Banks are hesitating in disclosing losses so no one knows the real size of the credit iceberg. The EUR is now in a downtrend and the next step will be to preserve the value of the currency in order to stem off imported inflation. Job cutting programmes in Europe have been initiated earlier the year and are in progress. One could say, the ECB under Trichet, while maintaining so called "stability" has not done a good job as most economic indicators and the exterior value of the EUR exhibits high volatility, a sign of a non accomodative monetary policy. You decide.