"Why not cut rates now?" - MW asks...
very easy - because Ben said so. US is leading a currency war and aims to have as cheaper usd as possible. and it is not succeeding! despite 00% IR, despite all those QEs and twists the dollar is very high, nearly 81 on the index - this is not good. if Draghi lowers the euro it'll give even more strength to the dollar. the more strength it gains the more pressure it gives on commodities such as oil (which is a good thing actually having cheaper gas (which does not get any cheaper though...) as it brings down expenses on manufacturing and logistics). but we leave in a world where economy is no longer a science - it is a subjective dream, idea, theory, call it whatever - nebulous... point is - there is a currency war where the States sacrifices half of EU and endangers the euro as a currency. and Draghi obeys the FED in helping it to keep the dollar down. i suppose it's not necessary to explain why the US needs cheap dollar? - for increased exports. btw we'll see the trade balance today and will see how increasingly expensive usd affects it.
but there is only so long that the EU can hold with these policies. 1/4th population in Greece is unemployed, 1/4th in Spain is unemployed, 11% in Italy... yet the currency (euro) is relatively strong. USA unemployment 8%, yet the currency constantly gets weakened... everybody knows (by now) that QEs do not stimulate employment. yet it is exactly the reason that the FED gives us for its programs. and the US elects Obama who has not done anything with job creation... not that I'm pro-Romney, not at all, i think it doesn't matter, but why vote Obama who does nothing and always puts this burden on Ben?..
what's a QE? - it's money. essentially. it's debt. what is debt? - it's money... where does this money come from? from the printer. where does it go? - regardless of the routes of transactions (from the fed to banks to govrnmnt and back to banks; or from the fed to govrnmnt to banks) - it doesn't matter. the money mostly ends up in banks. some of it goes to the needs it was printed for but it still ends up being in banks! and what do the banks do with it? they invest it in stocks, properties, bonds, and give just a little bit to some borrowers. and that's the problem - just a little bit! most of QEs went to the stock market. and that doesn't help the so-called economy at all! because who gets the invested money? - big, huge corporations and... banks... what do they do with it? they reinvest, they wash it, they pay themselves bonuses and wages... what about the employment? what about the "economy"?.. who cares?! the corporations understand one thing which you won't hear in the media - those who are unemployed are not needed. there is no demand for their labor! why? because there is no demand for the end products! QE is just pumping the pockets of certain individuals (the heads of those huge corporations). and it does nothing more than that... (so imagine how big those pockets are...)
look at the stats of the wages - they barely grew. look at the disposable income - not much... not much, yet we have this massive amount of money printed. and not just printed - BORROWED! who's gonna pay for it?... wanna guess? - the taxpayer... the taxpayer whose wages and DI did not increase much...
so, will Draghi cut the IR? i think he should! i don't know if he will. my forecast was that by the end of the year he will have lowered the interest rates (IR) to 0,25%. and he freaking should if he knows what's best for the EU. but Draghi is a puppet and therefore unpredictable. you can count on the next ir cut in Australia, that i'm almost sure of. but with Draghi... i guess it doesn't matter for the dyeing how sick he is. so taking that the EU is practically in a coma, i guess it doesn't matter at this point. i believe Ben did not reach his goal in getting the usd low enough to permit the ECB to lower euro. look at the US' reaction to China's currency manipulations - it says clearly "we want cheaper dollar and you're not letting us have it!". that's why Draghi is sterilizing the bond-buying euros - so that it doesn't bring the euro down and the dollar up, consequently.
taking that the eur/usd pair is below 1,30 i'd say Draghi won't cut the rates. but there is still a big probability he might. i'd say it's about 55 to 45 % chance for no cuts (45% for cuts)... this is a high probability... but for reasons stated, i tend to think he won't cut until the next time.
thanks for reading if you've read the whole thing
very easy - because Ben said so. US is leading a currency war and aims to have as cheaper usd as possible. and it is not succeeding! despite 00% IR, despite all those QEs and twists the dollar is very high, nearly 81 on the index - this is not good. if Draghi lowers the euro it'll give even more strength to the dollar. the more strength it gains the more pressure it gives on commodities such as oil (which is a good thing actually having cheaper gas (which does not get any cheaper though...) as it brings down expenses on manufacturing and logistics). but we leave in a world where economy is no longer a science - it is a subjective dream, idea, theory, call it whatever - nebulous... point is - there is a currency war where the States sacrifices half of EU and endangers the euro as a currency. and Draghi obeys the FED in helping it to keep the dollar down. i suppose it's not necessary to explain why the US needs cheap dollar? - for increased exports. btw we'll see the trade balance today and will see how increasingly expensive usd affects it.
but there is only so long that the EU can hold with these policies. 1/4th population in Greece is unemployed, 1/4th in Spain is unemployed, 11% in Italy... yet the currency (euro) is relatively strong. USA unemployment 8%, yet the currency constantly gets weakened... everybody knows (by now) that QEs do not stimulate employment. yet it is exactly the reason that the FED gives us for its programs. and the US elects Obama who has not done anything with job creation... not that I'm pro-Romney, not at all, i think it doesn't matter, but why vote Obama who does nothing and always puts this burden on Ben?..
what's a QE? - it's money. essentially. it's debt. what is debt? - it's money... where does this money come from? from the printer. where does it go? - regardless of the routes of transactions (from the fed to banks to govrnmnt and back to banks; or from the fed to govrnmnt to banks) - it doesn't matter. the money mostly ends up in banks. some of it goes to the needs it was printed for but it still ends up being in banks! and what do the banks do with it? they invest it in stocks, properties, bonds, and give just a little bit to some borrowers. and that's the problem - just a little bit! most of QEs went to the stock market. and that doesn't help the so-called economy at all! because who gets the invested money? - big, huge corporations and... banks... what do they do with it? they reinvest, they wash it, they pay themselves bonuses and wages... what about the employment? what about the "economy"?.. who cares?! the corporations understand one thing which you won't hear in the media - those who are unemployed are not needed. there is no demand for their labor! why? because there is no demand for the end products! QE is just pumping the pockets of certain individuals (the heads of those huge corporations). and it does nothing more than that... (so imagine how big those pockets are...)
look at the stats of the wages - they barely grew. look at the disposable income - not much... not much, yet we have this massive amount of money printed. and not just printed - BORROWED! who's gonna pay for it?... wanna guess? - the taxpayer... the taxpayer whose wages and DI did not increase much...
so, will Draghi cut the IR? i think he should! i don't know if he will. my forecast was that by the end of the year he will have lowered the interest rates (IR) to 0,25%. and he freaking should if he knows what's best for the EU. but Draghi is a puppet and therefore unpredictable. you can count on the next ir cut in Australia, that i'm almost sure of. but with Draghi... i guess it doesn't matter for the dyeing how sick he is. so taking that the EU is practically in a coma, i guess it doesn't matter at this point. i believe Ben did not reach his goal in getting the usd low enough to permit the ECB to lower euro. look at the US' reaction to China's currency manipulations - it says clearly "we want cheaper dollar and you're not letting us have it!". that's why Draghi is sterilizing the bond-buying euros - so that it doesn't bring the euro down and the dollar up, consequently.
taking that the eur/usd pair is below 1,30 i'd say Draghi won't cut the rates. but there is still a big probability he might. i'd say it's about 55 to 45 % chance for no cuts (45% for cuts)... this is a high probability... but for reasons stated, i tend to think he won't cut until the next time.
thanks for reading if you've read the whole thing
