Tuesday, November 16, 2010

Can't we all just get along?

The Europeans seem to be struggling over what to do with their PIIGS in a blanket again. Ireland is at the front of every financial mind right now and they seem to be close to announcing some sort of bailout to the tune of $80-$100 billion but it's a very fluid situation. Portugal, Italy, Greece and Spain (the rest of the PIIGS) are all next on deck and the other countries - France, Austria, Germany - seem to balking at the idea of fronting more money for their weaker brethren. Ultimately because the French banks own so much Greek debt and the German's own in excess of a hundred billion of Irish debt, I expect another bailout but this seems to be really rattling the foundation of the EU.

How does this impact us? Well, remember we're in the midst of QE2 which, despite the Fed's claims to the contrary, is designed to weaken the dollar and improve the prospects for our exports. When the rest of the world starts panicking - China's stock market is down 9% in the last 3 days btw - the money flows to the US dollar. Thus, our dollar has strengthened substantially in the last couple of days which could limit the effectiveness of the Fed plan.

The entire financial system is starting to tremble right now. Hopefully, we'll get back on course quickly.


1 comment:

The Hermit said...

Tremble?? Ireland and Greece have stuffed themselves with high debt bank burritos and are about to suffer the consequence. Would you stand behind them?
I think the whole situation really stinks, but let's watch what happens next.The worst is yet to come.