Valance Weekly Report 9.8.2011
Posted by WARREN MOSLER on September 8th, 2011
Valance Weekly Report
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US – Weak payrolls
EU – Confidence eroding
JN – Capex declined unexpectedly in Q2
UK – Austerity still being defended
CA – BoC left its Overnight Rate at 1.00%
AU – Q2 GDP reversed Q1 contraction, gaining 1.2% Q/Q
September 9th, 2011 at 5:45 am
I tried to promote mosler bonds in Europe for ya Warren….
http://www.zerohedge.com/news/guest-post-welcome-currency-wars
In my opinion, the Swiss and Brazilian moves signaled the true beginning of the global currency wars. The depreciation race to the bottom has begun. Trade wars will be next. This is just getting started. Once FX interventions fail, governments suffering from falling exports will attempt to protect local champions via protective taxes, tariffs and the limiting of certain imports. Affected governments and industries will retaliate for their own loss of exports and so on and so forth. Welcome to the currency wars.
Wither the Euro
Which brings us to Europe and the highly imperfect Euro. The only solution for Europe is a consolidation of fiscal authority at the national level, something like a United States of Europe. This will allow for the issuance of a Eurobond and allow the proverbial debt can to be kicked down the road a bit further. However, even this imperfect solution will never fly. There were times in the mid-2000s where the powers that be in Europe tried to pass a unifying constitution and they were soundly rejected. And this was when the economy was strong, jobs plentiful and the cost of integration viewed to be relatively light. In the current economic situation, however, integration seems unthinkable. All of the recent local and regional elections in Germany, Finland and elsewhere seem to verify this viewpoint as voters continue to elect politicians who will not support more bailouts or further losses of national sovereignty. Europeans are voting for less integration rather than more so this is a non-starter in my opinion. Which means more EUR weakness and eventually an unwind of the currency union. As investors exit the EUR, some will buy CHF and test the SNB. They lost billions earlier in the year on market interventions. They will lose billions more on this one until they eventually capitulate.
The currency union will fail not because the current political leadership wants it to, quite the opposite, it will fail because the people of Germany are Germans and don’t want to be equal members of a broader European concept called United Europe. Same thing for the Dutch, French, Belgians and others. This will ultimately kill the hope some hold out for the Eurobond concept. No fiscal union.
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