My Forex Online Views on Current Market Situation

Wednesday, June 10, 2009

I have spent several days now talking about the largest economy in the world, the US, and criticizing the economic policy choices that have been made there. Yesterday, the Wall Street Journal came out with an article that essentially justified my position. The article, written by Bill McGurn - a most respected financial columnist - focused on the claim that the Obama administration has “saved or created” a certain amount of jobs as a result of the stimulus.

The focus is not necessarily on what that number is (Obama puts it at 150,000 so far, and wants to add an additional 600,000 to that category), what is important is the fact that there is no way to tell how many jobs were “saved” as a result of the stimulus – it’s an arbitrary number and the media has fallen for it, time and again.

Another smokescreen the administration has put up was the reporting of the job numbers. When Obama talks about “creating” jobs, he does not tell you that a person, who was unemployed from a job paying him $100 per hour for example, is now on the government roles as a “temporary” worker, making $9 to $15 per hour. So while the numbers of the unemployed are going up at a slower pace now, it’s not like the Obama policy has managed to turn water into wine…

OK, I am done with the US for now. Shift to Germany, and the banking problems that the IMF declared yesterday to be dire. What would happen if these banks became insolvent? Would the IMF move to save them? If so, what would Latvia do? As all you in Forex Online land may know, Latvia has been pondering devaluing their currency in order to offset their debt, while EU officials have been coaxing them into not doing so. The Eastern Bloc nations of Europe have been hit particularly hard by this recession, and the EU has not come to their rescue, neither has the IMF.

Germany, the largest economy in Europe, is having issues - banking issues - that resemble Bear Stearns and Citigroup scale problems, and all of a sudden, the IMF and EU wake up and are now talking about “helping” out – the world is fair, you know?

Two messages that this sends to the East is that, 1) you don’t matter as much as the wealthier nations in the West and 2) while we are all in a partnership here (economic one based on the Euro) we are all not equal, not at all.

Forex online traders need to watch this closely, because if Latvia does devalue, which I suspect they will, it will have a ripple effect on the Swiss Franc, the Krona and the Crown. Forex traders should keep an eye out for EU economic news, and watch the IMF as they watch the German banks. it could prove to be an early warning sign of pending downtrends.


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Neil June 11, 2009 at 11:13 AM  

i totally agree with you regarding the subject of turning water into wine.

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