abcde_98

Dollar Takes Huge Hit

Thanks again, oh brilliant USA government for killing any strength we had in the USA dollar. And to add insult, billions of the Fed bailout money provided to AIG went out the window immediately to European banks.

Hawkish Comments From ECB Send Euro Higher

Follow up comment, with manufacturing sector in Euro-zone contracting, again, and more than expected.

Is the ECB still concerned about inflation? ECB is losing credibility. If there was another vehicle/large enough market to store value, then thew Euro would get hit quite hard by investors.

ECB needs modify its rules and stance on rates, and listen to sector / industry groups, rather than playing politics through interest rates.




On Dec 13 02:56 PM abcde_98 wrote:

> I don't think it is rhetoric, but a couple of the reasons Weber gives
> are silly
> (1) economy expected to pick up next year, so if we reduce now, we
> will have to raise again (likely) promptly. Well ECB, get off your
> arses, it's not a vacation/old boys club to meet monthly having expensive
> dinners/drinks.
> (2) we've never taken rates below 2% previously ....well, things
> change, we are in a unique economic situation, somewhat unprecedented
> (or at least something not seen for 75 years)
> (3) not enough information is available .... decisions need to be
> made on imperfect, incomplete information ... by the time you wait
> for the information, things have already become worse... the ECB
> is very fortunate that the EU is not one country because there would
> surely be some sort of banding together by the citizens and taking
> their issues to a single governement
> (4) avoiding negative real interest rates. is such situation expected
> to last for a long time or temporary? and what is so bad with such
> a situation, for a temprary period?
>
> Likely it's ECB politics, seeing that the USD was more of the currency
> that investors ran to for a safe haven. Well, ECB, several of your
> member countries had complained about significantly lower export
> sales b/c of high Euro, and look at the auto and other industries
> in your countries. Perhaps the reason is with a weak Euro that their
> jobs/prestige/life status is diminished and even further perhaps
> the EU could break up some time down the road.... the economies of
> the member countries are quite divergent.
>
> Maybe the EU needs to see more and more workers unemployed, or maybe
> cut the work week to 4 days or 30 hours, then the statistics will
> say there are fewer unemployed. There's only so long that the socialistic,
> very high taxation, ageing demographic countries can survive and
> create GDP growth.
>
> For the EU to survive, it needs to bring in more countries with younger
> populations, good GDP growth to make up / provide for the older /
> mature economies.
> hmmm, on that point, forget that alleged $50bn scam by Madoff, perhaps
> the EU is the worlds biggest scam!

EUR/GDP Could Hit Parity - Or Correct

Asbytec, thanks for your response. I've often wondered why the rate cuts have continued when the previous ones have had very little effect (yes, easiest/quickest tool for a central bank, gives perception of trying to help an economy even if know it might not have little effect).. Id say a floor of 1% would be good vs 0% (maybe the Fed can learn from Japan) or 5% (maybe the ECB can learn from others).vs 2%/2.

In another article ECB member Weber gives 4 reasons for possibly stopping the rate cuts. I was rather surprised at the reasons. You touched on 1 or 2 reasons. I'd appreciate your thoughts on Weber's reasons and my response comments. It's good discussion.
Here's the link to Weber's comments / my thoughts.
seekingalpha.com/artic...

Hawkish Comments From ECB Send Euro Higher

I don't think it is rhetoric, but a couple of the reasons Weber gives are silly
(1) economy expected to pick up next year, so if we reduce now, we will have to raise again (likely) promptly. Well ECB, get off your arses, it's not a vacation/old boys club to meet monthly having expensive dinners/drinks.
(2) we've never taken rates below 2% previously ....well, things change, we are in a unique economic situation, somewhat unprecedented (or at least something not seen for 75 years)
(3) not enough information is available .... decisions need to be made on imperfect, incomplete information ... by the time you wait for the information, things have already become worse... the ECB is very fortunate that the EU is not one country because there would surely be some sort of banding together by the citizens and taking their issues to a single governement
(4) avoiding negative real interest rates. is such situation expected to last for a long time or temporary? and what is so bad with such a situation, for a temprary period?

Likely it's ECB politics, seeing that the USD was more of the currency that investors ran to for a safe haven. Well, ECB, several of your member countries had complained about significantly lower export sales b/c of high Euro, and look at the auto and other industries in your countries. Perhaps the reason is with a weak Euro that their jobs/prestige/life status is diminished and even further perhaps the EU could break up some time down the road.... the economies of the member countries are quite divergent.

Maybe the EU needs to see more and more workers unemployed, or maybe cut the work week to 4 days or 30 hours, then the statistics will say there are fewer unemployed. There's only so long that the socialistic, very high taxation, ageing demographic countries can survive and create GDP growth.

For the EU to survive, it needs to bring in more countries with younger populations, good GDP growth to make up / provide for the older / mature economies.
hmmm, on that point, forget that alleged $50bn scam by Madoff, perhaps the EU is the worlds biggest scam!

EUR/GDP Could Hit Parity - Or Correct

i'd say the next relatively significant move of EURGBP will be based moreso on fundamentals (vs pure technicals)

UK is generally expected to reduce rates in January
EU rate decision in January now seems uncertain due to yesterday's statement/opinion by someone in the ECB that further rate reductions are belived to be limited.

The EU/ECB doesn't work so well in my opinion because there is rather wide divergence in the EU members' economies. This could be why the ECB often goes with the status quo (ie, no rate change) and is slower to act (change). But then again, Hugh Hendry had an ear-opening comment on CNBC in late October where he criticized the ECB's inaction and called it "the most conceited....(bunch of people)" (Google it for the eaxct quotation).
How the ECB thinks future rate cuts are limited is beyond me... their economies are doing poorly and seemingly will get worse, especially the Brit's tourism spending in EU, and banks who lent money to in Central/East Euopean homeowners who will have a very difficult time repaying the Swiss Franc/Euro loans.
Does the ECB have the best interests of EU citizens in mind?

ECB actions are perplexing.