All year there have only been 3 real issues dominating the markets. Can the Euro hold? Can the West restore growth without QE? Will commodities turn out to be a bubble?
Here we are 6 months in and some results are out:
1 - Greece has been bought off for another year. The can is kicked down the road. No one believes this is going to work , in the same way that no one believes Germany is going to close its Nuclear Power Stations. It does however, take the edge off the market for another few months
2 - Growth in the UK and US is falling away and now the focus is going to be on US QE3 - the markets need it to hang on to their 2009/10 gains.
3 - Commodities are bubble tastic, however with all the QE money sloshing around, the challenge of treasuries given US debt and volatile markets - the speculation is not over.
So there we are, I think we will know in a month or two if there is going to be more US QE - it will be defining for the markets, if the punch bowl is taken away, the party will be over.
4 comments:
QE is going to be the American way of doing things for many a quarter yet to come.
When you have to dip into pension funds just to keep up with daily spending, what hope is there on the horizon, other than more bouts of QE?
I think the American markets have already factored it in to the way they see things.
Redwood says that the UK money supply is contracting again. Is this the case? I think we are going to see more UK QE before long.
With all the OTC derivatives out there QE 3, 4, 5.... is guaranteed. They just have to wait for the bad news to build up to give them cover to begin.
Most Commodities are priced in Dollars. Dollar QE is hitting the real value of the greenback and exporting food and raw material inflation to the rest of the world.
The commodity bubble is partly the story of the withering dollar. Particularly precious metals which also have the function of "currency of last resort".
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