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Posts by "deep"
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Posts by Anonymous "deep":
EURUSD 1.1851 |
USDJPY 111.52 |
GBPUSD 1.3772 |
AUDUSD 0.7485 |
USDCAD 1.2406 |
GBPJPY 153.59 |
EURJPY 132.15 |
AUDJPY 83.48 |
CADJPY 89.86 |
Silver 26.23 |
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Apart from Yen do you track other Asian currencies. I know Korean Won has been hit very badly and considering the high loan to deposit ratio of Korean banks which is financed internationally. Any increase in risk appetite will hurt the korean won. For AUD and CAD the decrease in commodity prices will impact negatively. I think in one of your articles you mentioned the reflation affect of the present economic policies which will have a positive impact on commodity prices going forward. By when do you think this trend will be visible. Only problem in that is that some of the rise in commodity prices has been caused by hedge funds and with most hedge funds liquidating it seems that commodities are going to face downward pressure and the countries that export commodities will have weaker currencies. to add to this is the significant decline in industrial production in China which will reduce incremental demand for commodities. China is the big uncertaintly in all of this- lets see if their stimulus package is able to sustain growth.
Another interesting development is the crisis in Eastern Europe and increase in spreads between Italian/Spanish and German bunds. If the crisis is long and deep as is expected I think Euro may not exist at the end of it.
Deep
Thanks for your reply. I agree with your arguments that the US consumer (may be barring UK) is in worse shape than Europe. But there is an issue of demographics that has not been considered. The population of Europe is declining so it will be hard to increase consumption. Also even though America is more impacted by the problem with CDO's and CDS's (actually I wrote a code to model CDS!!!), Europe has exposure to Central and European counties. Austian banks have huge exposures to Central Europe and Spanish banks to Latin America and presently the credit spread for Hungary, Ukraine, and Argentina are huge. With the flight to quality (presently is the time to worry about "return of capital" rather than "return on capital") there is a large possibility of emerging market crisis and we could see default of some countries. Spanish banks are suffering from a domestic loan crisis, how will they deal with a crisis in Latin America.
I am not so confident regarding the Euro. If the present economic crisis is long and severe than it could put severe strain on the Euro. May be it will last due to the political and economic capital invested in the project.
Anyway these are interesting times. I thank you again for taking the time to read my comments.
Regards
Deepankar F.R.M.
Your website is really informative. I disagree with you on one of the articles where you had said that Europe's economy is in a better shape than USA. I still believe that USA in the long run will grow at a faster rate than Europe as a whole. Yes Europe has a capital surplus but that is mostly due to Germany not others like Italy, Spain, and Greece. I personally do not see how euro can be sustained for long due to the tensions that will develop among the different countries. Also the subprime crisis started in USA but it will have a big impact on European banks especially UBS and UK's economy which is predominantely dominated by finance industry.
That however does not mean that US economy is going to have smooth sailing. The private demand is collapsing along with investment. The government needs to engage in fiscal stimulus, government spending on infrastructure is the need of the hour instead of tax cuts which will be saved.
Please keep up the good work