Japan can certainly use their EUR reserves to buy bonds with but this gives them the green light to go long EUR/JPY in order to weaken their currency, much like China is using this a ruse to weaken theirs. I'd take advantage of this cover if I were them as well.
EUR/JPY longs until austerity results in negative growth and increased deficits.
re: catnip, I'm not sure what happens first, however, regarding political fallout (being kicked down the road) versus deflation, which strengthens a currency
Fundamentally I see the following a reasons why I would expect a Euro rally:
- tight fiscal policy, which results in less Euros being spent into the economies, promoting deflationary domestic conditions.
- Fed USD swap lines buy institutions time to borrow USD to cover USD losses at an inexpensive cost rather than having to sell EUR to obtain USD
- higher price of crude makes USD more obtainable by non-US sectors (can obtain USD from oil exporters rather than having to obtain them via trade with the US)
The reasons why I would expect a Euro decline:
- political uncertainty
- Dollar losses don't recover
I suspect the reasons for decline will continue to be kicked down the road although I'm not certain what the time frame is for some nations that seem to be overlooked like Belgium. Any Euro member withdrawal would reduce the operational demand base for the currency.
Typos a plenty, I meant to state that "Much as String Theory was rejected decades ago only to now be embraced to the degree that it has evolved to M Theory..."
Part of the difficulty in understanding the US economic system is the false instruction provided in academia reinforced through the brainless media and equally brainless (or increasingly untruthful) US politicians. Neo classical economists, monetarists, Austrians, all have their shortcomings, the largest of which is an implied insistence of their theories as if they were religion rather than a science. I acknowledge the contributions of each group but have started to notice a segment that seems to "get it" more than the aforementioned: the Post-Keynesians. Note that Post-Keynesians are not Neo Classicals, as the latter will claim Keynes' teachings but leaves one suspecting if they've ever read The General Theory or any of Keynes' subsequent notes in the first place.
Much as Sting Theory was rejected decades ago as nonsense (to the point now it has evolved to M Theory), we are realizing the shortcomings of Neo Classicals, Monetarists, Austrians as their theories in their inception seem to all have failed to understand how a fiat money system differs from a commodity based one.
What QE does force is for people to begin to understand the differences between a fiat money system and a commodity backed on (i.e. convertibility into gold pre-1971). The US cannot ever had a "borrowing" or "taxing" problem as a result, rather only an inflation problem. The same rationale that is applied to the Japanese level of debt and aging population not posing a problem (since debt is domestic, internally funded) really should be restated to indicate that Japan doesn't have a Japanese Government Bond problem because that is denominated in JPY. The US takes this to a wider range because not only are UST's denominated in USD, but as the world reserve currency, the majority of the world's debt is denominated in USD.
catnip: I realize QE is not printing money. It is a redefinition of the term structure of the maturity of government treasuries. The first wave of QE (started in late November 2008) is sitting with the Fed as excess reserves. All that really happens via QE is that the Fed debits and credits the Treasury accounts and Excess Reserve accounts by the amount of purchases.
The Fed's interest rate policy, the US's relative growth prospects, and exported capital are the reasons why USD has weakened, not QE, though the front-running of QE impacted USD weakness. As we have recently seen the USD strengthen on position unwinds due to risk aversion and year-end profit taking, this has occurred despite the Fed's OMO. QE can only affect the price, not the quantity of money, and it appears that the price impact (lower interest rates) has already seen its near-term low.
Have not read all the posts but agree with catnip from what I've perused. Turning point of PBOC likely will occur within timeframe of 2012 transition of power.
Try publishing this in the UK weekend papers: Traders bet BankofEngland will raise rates to 6.25% --highest since 1… https://t.co/GWXrTEAk4R(11 months ago)
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ما وراء هبوط الدولار مع الذهب و من منهما يتمكن الارتداد؟
موعدنا الآن في غرفة شركة إكس أم لجلسة الأسواق
https://t.co/Y7tD0RxCS2
@XM_COM (11 months ago)
Jobless claims > 300k before next FOMC meeting would be ideal for Fed to make up for any CPI upside surprise (11 months ago)
"Cook & Eat at Home" scheme may come next to defeat UK inflation... (11 months ago)
Earlier in the week gold selloff was attributed to smaller than exp China EASING. Metal is now holding v well despi… https://t.co/ZW9cmXTPWW(11 months ago)
إستعمال تحليل الإنترماركت والتحليل الفني الكلاسيكي لتداول الذهب و الناسداك و السندات. شاهد هنا
Using intermarket technicals analysis to trade XAUUSD Nasdaq100 and Bonds.Watch here.
Latest Hot-Chart - May 16
Dax 200 DMA Deviation
You remember we went short Dax40 in late March based on the 13% 200 DMA extension, which gave us at least a 500-pt gain.
View Hot-Chart..
EUR/JPY longs until austerity results in negative growth and increased deficits.
- tight fiscal policy, which results in less Euros being spent into the economies, promoting deflationary domestic conditions.
- Fed USD swap lines buy institutions time to borrow USD to cover USD losses at an inexpensive cost rather than having to sell EUR to obtain USD
- higher price of crude makes USD more obtainable by non-US sectors (can obtain USD from oil exporters rather than having to obtain them via trade with the US)
The reasons why I would expect a Euro decline:
- political uncertainty
- Dollar losses don't recover
I suspect the reasons for decline will continue to be kicked down the road although I'm not certain what the time frame is for some nations that seem to be overlooked like Belgium. Any Euro member withdrawal would reduce the operational demand base for the currency.
Much as Sting Theory was rejected decades ago as nonsense (to the point now it has evolved to M Theory), we are realizing the shortcomings of Neo Classicals, Monetarists, Austrians as their theories in their inception seem to all have failed to understand how a fiat money system differs from a commodity based one.