Being in Europe gives you a strange perspective on markets. After all, by the time the US markets open it is already 3:30 in the PM over here. The English, French, Germans, not to mention to the Chinese and Japanese have all pretty much spoken. Markets are up or they are down. They tend to move in synchronization. I wonder how many American investors even bother to check what the rest of the world has said before they get ready to make their own market moves in the US. Should the fact that the Nikkei was up or down have any impact? How about the FTSE or DAX or CAC for that matter? Are all these foreign investors merely making bets on where they think American investors will go that day?
In Europe the big financial news yesterday was that the two largest economies in the Eurozone, Germany and France were about to cheat on the guidelines that they so painstakingly laid out for themselves and everybody else in the single currency. Needless to say, the Spanish, Dutch and Finns, who were keeping their spending down below the limits, got a little miffed at the move by the big guys. What Germany and France said, basically, was that with stagnating economies they were going to go into a 4th year of deficit spending representing more than 3% of their respective GDP’s. The net result should have been a rush out the door for Euro’s and a stop in the dollar/Euro slide. No such luck for punters like me paying a 20% premium on everything I buy these days. For the umpteenth time in a row, the Euro gained slightly against the dollar. This on the heels of news that the US economy has sprinted ahead at its highest rate in more than two decades, news that should have sent interest rates upwards in the States and sent a signal that growth inspired inflation would soon be back on its normal levels, whatever those are supposed to be. Of course, the word here in Europe as they buy and sell Treasury futures is that US interest rates are on their way further down.
The US deficit at around 6%, of course, makes these Old Europe powers look like frugal poodles and shepherd dogs
What a perfect world we live in: The two largest economies other than the US, Europe and Japan lie at the feet of the US market like lap dogs waiting for their hormone-driven cousins to continue on their consumer driven buying binge. In financial-hormone zone, Cars get bigger –in comparison, you should see the little cute things their driving here in Rome called Smart Cars—Machouses get bigger and built at an even faster pace, durable goods sales are up and the markets move back to heights last seen in early 2001.
It all looks great! Americans print dollars and spend them on items made abroad. The foreigners –mainly Asians—build more factories, hire more people and make more things for the shelves of Wal-Marts or the virtual market on Amazon or Ebay. They take the dollars no questions asked and use them to buy more American Treasuries to finance even bigger American debts. It sounds like we have reached economic Nirvana. It is Thanksgiving Day eve and we certainly have much to be thankful for. We may be a little skeptical that it is all going to last but let’s hope.
In the dance of the perfect circle the Chinese RMB (not me) and the US$ dance in perfect harmony, like Fred and Ginger frozen on the shining screen, always brightly swirling, never a misstep, the ball will last forever, or so we hope.
Rmb
Rome
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