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Around the World - Tips & Comments






Abbiamo bisogno di un Euro forte? - Who wants a Stronger Euro..?




Are we at a courrency conflict, again?

May be. With the Bank of Japan now buying government bonds and targeting an inflation rate of 2%, a global race to the bottom is on again.
Along with the Fed's commitment to "quantitative easing" and the ECB's promise to buy dodgy Mediterranean economies' bonds, Japan's latest move has sparked new fears of a currency war.
Like any other war, this one won't end well, either.

And who can be the winner? Surprisely, it is the U.S. Dollar that will likely maintain its value against desperate contenders like the yen, the euro and the pound (.../...)

Breaking Down the Currency Wars
The truth is Japan's stated goal of reaching inflation of 2% doesn't look all that ambitious until you realize that the Bank of Japan's forecast for inflation to March 2013 is only 0.4%, and its forecast to March 2014 is only 0.9%.
That's why the Bank of Japan has committed to a massive bond purchase scheme of about $1.2 trillion by January 2014, plus another $150 billion per month after that.
Believe it or not, that's nearly twice the size of Ben Bernanke's stimulus program for the United States, and Japan's economy is only one-third the size of the U.S. economy(.../...)

Admittedly, the Tokyo market is already up more than 10% since the election last month, and has further to go. But I wouldn't make any long-term bets on that market, or the yen.
Like the Bank of Japan, the Bank of England is also committed to monetary stimulus. The current Bank of Canada governor Mark Carney joins the Bank of England in July, but he has already indicated that he likes the stimulus program and would consider expanding it.
And like Japan, in relation to the size of the economy and the government deficit, Britain's stimulus bond-buying program is also bigger than the Fed's.
Compared to the other players, the European Central Bank is the most prudent; it has representatives of the German Bundesbank at various key points in its hierarchy, and its President Mario Draghi is himself monetarily cautious.
However, several of its member countries need the ECB to buy their bonds in order to avoid running out of money altogether. Moreover, one of its big players, France, has installed a crazed tax scheme for high earners that is causing a mass exodus, and is bound to bring economic trouble in coming months.
Draghi has promised to buy bonds of dodgy Eurozone governments when needed, and it seems certain that it will be needed at several points in the next year.
Then of course there's the risk the euro might break up altogether. You can guess what that would do the value of the euro.
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© 2009 - Rodolfo Rossi | Print
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