At the moment the market holds the believe that the US economy will be faster out of the crisis then the rest of the world the understanding is that the reaction of the fed to cut rates agressive was the right answer to the ongoing crisis and that the risk of inflation is far less to be afraid then a downturn in the economic .
In europe the ECB showed a much more willingness to fight inflation and this is the primary concern of all EU members . which to the believe of the market did in fact hurt the economy and will be much a longer crisis then in the US therefore the ongoing dollar strenght.
This strategy will only go good for the US if the Inflation will not pick up and therefore lower OIL prices are postive for the US economy to push down inflation and to improve the current account deficit . but this is only the begining of the story. thare is no way out to the crisis for the US economy. if the dollar gets much stronger this will hurt exports but it will bring down inflation so their is no need for the fed to adjust the rates but the economy will not grow from the export so the must rely on the consumer one other reason for low rates and in that cenario a strong dollar may hurt the economy in the end because if the economy stays stable inflation will find his way as we all know allready and their will be no way out of it, then to lift rates which will make eventually the dollar even more stronger and will hurt the economy to hard so i do not believe the fed will risk a recession based on less export and less consouming which leaves us with the fed not doing anything and relying on the consumer which in the end will bring them a lower dollar which in the end is positive for the export the only way for the fed to fight inflation is when the export sector will pick up .
in europe the story is different the primary reason why the are at the moment in difficult situation is because the effect the US has to the rest of the world lowering rates will not help the economy at all most of the growth in europe comes from the export sector (germany) so their primary concern will be the inflation which is still to high to be comfort with and now comes the point the US maybe the first to get out of the trouble relying on their consumers by ultra low rates but the impact the US will have on the rest of the world with it will be much greater because ones the consumer picks up in the US the rest of the world will be excactly their were it was left before the crisis in a god shape the export will growth to the US, the Europe economy will again florish and the ECB will higher rates before the US
so maybe the US will be first out of the Crisis but Europe will first higher rates without damaging the economy which in my point of view is EURO positive this is only a hypothesis which still is not yet proven to be right
In europe the ECB showed a much more willingness to fight inflation and this is the primary concern of all EU members . which to the believe of the market did in fact hurt the economy and will be much a longer crisis then in the US therefore the ongoing dollar strenght.
This strategy will only go good for the US if the Inflation will not pick up and therefore lower OIL prices are postive for the US economy to push down inflation and to improve the current account deficit . but this is only the begining of the story. thare is no way out to the crisis for the US economy. if the dollar gets much stronger this will hurt exports but it will bring down inflation so their is no need for the fed to adjust the rates but the economy will not grow from the export so the must rely on the consumer one other reason for low rates and in that cenario a strong dollar may hurt the economy in the end because if the economy stays stable inflation will find his way as we all know allready and their will be no way out of it, then to lift rates which will make eventually the dollar even more stronger and will hurt the economy to hard so i do not believe the fed will risk a recession based on less export and less consouming which leaves us with the fed not doing anything and relying on the consumer which in the end will bring them a lower dollar which in the end is positive for the export the only way for the fed to fight inflation is when the export sector will pick up .
in europe the story is different the primary reason why the are at the moment in difficult situation is because the effect the US has to the rest of the world lowering rates will not help the economy at all most of the growth in europe comes from the export sector (germany) so their primary concern will be the inflation which is still to high to be comfort with and now comes the point the US maybe the first to get out of the trouble relying on their consumers by ultra low rates but the impact the US will have on the rest of the world with it will be much greater because ones the consumer picks up in the US the rest of the world will be excactly their were it was left before the crisis in a god shape the export will growth to the US, the Europe economy will again florish and the ECB will higher rates before the US
so maybe the US will be first out of the Crisis but Europe will first higher rates without damaging the economy which in my point of view is EURO positive this is only a hypothesis which still is not yet proven to be right
