Now that global central banks are off the one-size-fits-all monetary policy, it’s starting to get exciting.
We sent comments to some of our members on Sunday morning, discussing the potential for a euro-carry trade to materialize. Our logic: the European Central Bank will have no choice but to take on crummy collateral in exchange for funding. The result: a lasting slide for the euro.
Party time! Excellent! Impressive! European leaders do know how to spike a
punchbowl; that’s for sure. Two objectives to this party: 1) stave off the demise of the
European Monetary Union, and 2) Punish those nasty speculators and trigger a massive
short squeeze.
“The European Union agreed on an audacious €750 billion ($955 billion) bailout
plan in an effort to stanch a burgeoning sovereign debt crisis that began in
Greece but now threatens the stability of financial markets world-wide,” The
Wall Street Journal reported.
Unfortunately the German parliament voted to approve 22.4 billion euro loans for Greece today. The euro bounced on the news. I was hoping of course for lawmakers there to finally drive a stake through the heart of that silly artificial government bungled construct known as the single currency and do us all a favor.
A stake through the euro is what market is telling us should be done. But of course, how dare the market make a judgment on the wisdom of political hacks…how dare it! Speculators must be punished I tell you. Off to Room 101! [Room 101 of course, is that place where one’s worst imagined fears are brought brilliantly to life in the name of loving rehabilitation by Big Brother in George Orwell’s 1984.]
A heck of a week for the buck so far, right?
Granted we still got a lot of time left before it sticks, but the weekly bar on a chart of the US Dollar Index looks rather impressive:
Ah…is Mr. Market finally waking to the systemic global macro threat that was always lingering in the background of Eurozone debt default? “Yes indeed,” he said.
There is much talk of the dreaded “C-word” in the financial press this morning—CONTAGION! Keep in mind, if you utter the word contagion the words emerging markets (EM) must come next.
