Re: Euro-Dollar Parity

[Warren Mosler <mosler@xxxxxxxx>]

I suspect the real test will come during a slowdown of the
euro economy.  Debt markets will not permit countercyclical
deficits by the member nations.  Just like the States in the US,
euro nations will be forced by the debt markets to run procyclical
fiscal policy during a slowdown, cutting spending as revenues fall.
And the ECB, the only entity technically capable of countercyclical fiscal,
is not permitted to do so.

Let's hope the recovery continues.

http://www.warrrenmosler.com


Sven R Larson wrote:

> If the current political turmoil in Germany does not escalate, maybe the
> most serious phase of the euro's crisis is over (the Austrian issue
> disregarded). But it sure looks like more is coming - the entire
> leadership of the Christian Democratic Party is under criminal
> investigation on rather ugly funny money charges. A couple of them have
> developed close connections with the incumbent social democratic
> government, so this threatens to contaminate the entire political
> establishment. My guess: if fmr chancellor Kohl does not have to stand
> trial, I guess this will slowly fade away. If he's charged (among other
> things, with tax evasion) then we have to adjust our expectations to the
> worse.
>
> /srl
>
> "ÁÎ×Ó¹â HenryC.K.Liu ¹ù¤l¥ú" wrote:
> >
> > Yesterday, the euro approached parity with the dollar.
> > Analysts traced the upward movement to optimism generated by the German
> > tax reform proposal.
> > Japan's heightened troubles also presaged the yen's fall.
> > Also, Summer's loose lips on the Treasury's buyback strategy the day
> > before in the corridors of Congress, about "using the entire yield
> > curve" has caused whipsplash for bond traders.
> > This revived snipping at Summers' ability to assuage the market as
> > compared to Rubin who came from Wall Street and a bond trade par
> > excellent.  The concern on Summers' ability to continue Rubin's strong
> > dollar policy has yet to be put to bed.
> >
> > The last few days has put a damper on the wealth effect of bond traders
> > who might have regurgitated their entire bonus take for 1999.
> >
> > Henry C.K. Liu
>
> --
> -----
> Sven R Larson
> Department of Social Sciences, Bldg. 22.1
> Roskilde University
> Pb 260
> DK-4000 Roskilde, Denmark
> Phone: (+45) 4674 2910
> Fax: (+45) 4674 3080
> Rigor rei publicae forum populi delit;
> forum populi deletum rei publicae dissipationem veniat.

--
Warren Mosler
Director of Economic Analysis
III Finance

http://www.warrenmosler.com