George Washington
--and the fact that this hasn't happened in over two centuries is proof of how very farsighted Washington was.
Posted on 04/26/2008 2:13:55 AM PDT by dennisw
The euro has suffered its sharpest drop in four years as a blizzard of weak data from Germany, Belgium, France, and Spain spark fears that economic contagion may be spreading from the Anglo-Saxon world to Europe.
Spain's business federation warned that Spanish unemployment will rise by 500,000 by the summer unless the government takes "valiant measures" to offset the housing and construction crash. "For every dwelling not built, two workers will lose their jobs," said the group's president, Gerardo Diaz Ferran.
The country's credit group ASNEF said the volume of personal loans had dropped 30pc in the first quarter, the worst performance since the country's financial crisis in the early 1990s.
Troubling data in Spain has been building for months, but investors have tended to focus on Germany as a proxy for the whole eurozone. A shock drop in Germany's IFO business confidence index yesterday caused an abrupt change of mood in the currency markets.
The euro plunged to $1.5646 against the dollar, down from its all-time peak of $1.6018 on Tuesday. It is still 27pc above its level two years ago.
The German data follows a slide in the Belgian index, which captures crucial port activity in Antwerp. The headline confidence figure fell to -7.4 in April from plus 1.2 in March, with a dramatic slump in the export order books to -14. This is flashing near-recession warnings.
David Owen, an economist at Dresdner Kleinwort, said Europe would soon be engulfed by the twin effects of a "collapse in export volumes" and a slow motion credit squeeze. "The wheels are coming off the eurozone economy," he said.
BNP Paribas warned clients yesterday that the "decoupling story" was no longer credible. "We see Europe in the early stage of a credit crunch, and if we are right credit supply will shut down," it said. Key governors of the European Central Bank began to back away from their hawkish stance of recent weeks, clearly disturbed by the market perception that they are mulling a rate rise to choke off price rises. Inflation has reached a post-EMU high of 3.6pc on surging oil and food costs.
Jean-Claude Trichet, ECB president, went out of his way yesterday to brief journalists that "sharp" currency moves had "possible implications for financial and economic stability", a coded threat of co-ordinated intervention by world central banks.
The comments caused a second scramble for dollars in mid-day trading as speculators rushed to cover "short" positions against the greenback.
The ECB is under heavy pressure to soften its rhetoric from both France's president Nicolas Sarkozy and Italy's premier Silvio Berlusconi, though the pair have so far stopped short of invoking treaty powers to force a change in the exchange rate - at least in public.
The EU-wide lobby BusinessEurope said: "The strong euro is alarming and in particular the speed of its appreciation since the start of 2008 is a key concern for European companies."
France is succumbing to the slowdown. Insee business climate index fell harder than expected in April to 106, from 108 in March.
Eric Chaney, Europe strategist at Morgan Stanley, said the April survey by French corporate treasurers was "alarming", pointing to distress in the financial system. "Let's call a spade a spade, some sort of credit crunch is unfolding in the funding of French companies," he said.
The IMF has cut its eurozone growth forecast three times since October and is predicting 1.4pc growth for the bloc this year and 1.2pc next year. It warned in its regional report this week that Europe will suffer 40pc of the entire $940bn global losses stemming from the credit crunch, with losses of $123bn faced by European banks alone.
LLS
I agree that the free market will correct itself, but if the politicians in Washington had the wit and benevolence to eliminate the capital gains, inheritance, and corporate taxes and start extracting and refining domestic oil, the U.S. economy would leave Europe’s and Asia’s behind in the dust.
In absolute terms the 4 cent drop may not be much, but to people playing the currency markets it’s undoubtedly a huge move - some folks made a bundle and some folks lost their shirts. To the rest of us, the sun still came up this morning and not much has changed.
The question is if the euro starts to plummet vs. dollar, where will the Chinese and Arabs put their money? Do they buy more US treasuries? Do they buy hard assets (companies, real estate) in the US? I am not at all sure with the way things are looking for the US economy they will do that. We are at the beginning of a global contagion with paper currency. Those with excess cash may rather invest in hard assets of some sort, but the key is what?
“Paper money will…ruin commerce, oppress the honest and open the door to every species of fraud and injustice.”
George Washington
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Ludwig Von Mises
When the Euro gets below $1.30, it might be called a dive.
--and the fact that this hasn't happened in over two centuries is proof of how very farsighted Washington was.
"The wheels are coming off the eurozone economy," he said.THATS the funniest thing i've read today... 8^)
sounds like a tagline.
“The euro has suffered its sharpest drop in four years “
Keep it going.
I want to travel Europe on a strong dollar..
Ping
When the US stops buying and flying, the world goes down. The multinational traders on Wall St., who have been selling the story that there is a “decoupling” of the world economy from ours, are wrong again. Example: The global food shortage resulted from the US changing its grain surplus into fuel, thanks to Bill Clinton, Algore and the Dems in Congress in the ‘90s.. When we screw up, the world suffers.
Remember, they do things differently than we do and attempt to get ahead of the curve.
They never succeed of course, but that's what they try to do.
In France they sought to spread unemployment with a 36 hour week that prohibited overtime, even for lawyers!
Didn't work.
But, our best bet is to let the Europeans play. Their alternative "plan" is almost always a bit of looting on a major scale ~ you know, like Spain invades France, France invades, Belgium, Sweden nukes Prague ~ on and on.
“Anglo-Saxon world to Europe”
England is killing Europe??
Those were my first thoughts, too. I'll be in Italy and Greece the end of August and was just thinking about buying Euros for the trip. Think I'll wait a while.
Actually recently Soros made comments that seemed he has switched from long euro to long the dollar when the euro was about 1.58.
Thanks for the ping.
Take her to Quebec!
All the arrogance of real Frenchmen without all that frou-frou- culture BS!
Even before the Euro was implemented there were many who questioned the possibility of maintaining a unified monetary policy with such vastly divergent economies. What they seem to have forgotten is that the US has over 200 years of unifying of the economies of the states to make attempting it even possible, and we don’t always get it right.
Even when all of Europe has a slowdown it’s not likely that the same actions will work for all the nations, or that the recoveries will happen at the same rate.
Since this is California, it probably understates trade changes going to Europe, but it does show a definite change in the flow of goods.
Thanks much....
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