Weaker eurozone manufacturers losing competitiveness

The eurozone’s manufacturing sector is growing at its fastest pace in two years.  However, there are dramatic differences in how manufacturing is faring within the eurozone which point to the currency as a major source for the loss of competitiveness in Greece, Spain and Ireland. The eurozone manufacturing purchasing manager’s index came in at 52.4

Iceland downgraded to junk as it heeds 70% of the electorate on Icesave debt

The latest piece of big news in the sovereign debt crisis comes, remarkably, from Iceland. The country collapsed into depression after its experiment as an open economy with a large banking sector went pear shaped. After a debt-fuelled boom and a huge influx of hot money due to high interest rates, its currency and banks

Iceland and the wonders of competitive currency devaluation

Ambrose Evans-Pritchard has a good piece on Iceland out today at the Telegraph. The main point of his article is that Iceland is emerging from crisis and depression in a relatively healthy state due to a fifty percent currency devaluation.  While, GDP will shrink by 7% this year in Iceland, Ireland, Latvia, Estonia and many

China’s present growth story is built on malinvestment

Late last year, I predicted that China, as a major exporter to the West, would feel a huge impact from the meltdown in the global economy, taking it’s growth rate down to 2% (See Top ten predictions for the 2009 global economy). Forgetting about the fact that data are highly suspect in China, I see

Clarifying press inaccuracies to help clean up the banking system

Today, I came across two attempts to clarify allegedly misleading articles in the press. Both clarifications were made in regard to how the banking system clean-up in the U.S. is proceeding. I will present them to you in as neutral a tone as I can muster.  However, I should say I am sceptical as to

More thoughts on quantitative easing from Morgan Stanley

The following post is up on Morgan Stanley’s website and highlights the degree to which money printing has become the policy tool of choice used by central bankers with which to fight this deflationary threat. I have highlighted the whole paragraph on the inflationary risk of all of this

The EU promises to bail out eurozone members

About a week ago I reported on an Austrian story that the EU was gearing up for a bailout of any eurozone members which found themselves in difficulty (see my post, “EU planning 200 billion euro package for Eastern Europe“. This report is now being confirmed by multiple sources including Joaquin Almunia, the economics commissioner of the European Union

Mea Culpa: The Fed is not going to buy treasuries

Judging from recent events, the bond vigilantes are right to suspect that Ben Bernanke is all talk and no action when it comes to keeping long-term rates low. If you recall, I had actually believed the Fed would support bonds because it was concerned about long-term interest rates. This is part of the reason I believed that Treasuries would rise despite being in bubble territory but it looks unlikely

The Eurozone and the spectre of banking collapse

I am skeptical as to the economic benefits of the Eurozone. In my view, the Euro has always been more of a political construct than an economic one. Nevertheless, the Euro has functioned quite well as a leading international currency in the decade since its formation. However, the present financial crisis is revealing tensions within the Eurozone, the consequences of which are not readily apparent

European-Asian trade falls off a cliff

Ambrose Evans-Pritchard has picked up on the decline in trade flows that many have highlighted in recent months. This time, he looks at European-Asian trade flows and sees some major problems

Volcker warns how serious things have become

In a very downbeat assessment of the ability of financial and monetary stewards to deal with the most protracted financial crisis is some 75 years, Paul Volcker, the esteemed former Fed Chariman warned that the economic slump has spread in a way that greatly challenges the Obama administration’s ability to restore order. The Telegraph’s Ambrose

Currency crisis is gathering storm

In the last few weeks, the currency market is where the action has been. We have witnessed massive moves in every major currency and in some not so major ones. To my mind, all of this is a prelude to some sort of currency crisis.

This crisis has been sneaking up on us as most of us have been transfixed by the U.S. subprime crisis and the subsequent credit crisis. For some currencies, it has been a sickening ride. The U.S. Dollar plunged to 1.60 to the Euro only to snap back viciously to 1.25. The U.S. Dollar plummeted to below 2.10 to the British Pound but is now above 1.60. All of this in the space of a few months.

But, it is in commodity and emerging market currencies where the trouble is brewing