If I happened to know the German national anthem I’d likely break out in song right now before I finished typing up this piece. Oh, by the way, did you hear that German investor confidence blew past expectations in a sign that the recession is coming to a close?
Yeah, I’m serious.
Soaring unemployment in Europe, with still huge banking exposure, rising political tensions, fiscal concerns among the PIGS, a little country called Latvia that may be the canary in the coal mine for its Eastern European neighbors so similarly afflicted and a Russian finance minister reaffirming his commitment to the US dollar and what do you get? Maybe a top in the euro!
The numbers are staggering…really incomprehensible…it’s the kind of stuff that if you made it up no one would believe you…I’m talking about the amount of money both the US and European Union have committed to this crisis:
• The US government and Fed spent or lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year.
• European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany ($3.3 trillion).
Imagination inflation – a.k.a. imagiflation -- is what’s needed in order to understand price action these days.
Deflationary trends remain; no concrete evidence of inflation just yet. China yesterday posted a notable drop in its May Consumer Price Index. Of course, this bolsters China recovery efforts, according to news sources. Sure, in one sense it does, I guess.
But would the picture be any different if inflationists weren’t in control of the market right now? I think so.
Yesterday, the dollar got pasted. Was it because:
a) Geithner speaking
b) Risk appetite trade
c) Jeopardy of dollar reserve status going away
d) Concern about the radicalization of the US economy by President Obama
e) Another big bond auction
