Thursday, 23 Sep 2010 11:12 AM
By: David Skarica
Back in the spring when everyone was worried about the euro
going back to par, you remember that in this blog we got very
bullish on the euro.
Much of it was sentiment we just saw that was just too bearish
on the euro.
The daily sentiment reading of currency traders towards the euro
hit 2 percent in May. Usually when too many people think the
same way, the market has a way of reversing itself.
However, it wasn’t just sentiment that had me bullish on the
euro while others were too bearish.
In the spring, we could see European governments getting their
act together.
Cutting spending, turning to austerity to curb out-of-control
deficits.
The British budget slashed departments by 30 to 50 percent and
raised the VAT to cut the deficit in the U.K.
In the U.S., we have heard no such talk. In addition, the Fed is
talking of QE2 (printing money to prop up equity prices) which
just devalues the dollar more.
Right now, every level of the federal government doesn’t care
about the dollar.
Politicians are making no attempts to cut the deficit, the Fed
is just talking about more money printing. This is why the euro
hit the highest level since the spring and is back near $1.34.
It is also why gold is soaring. I don’t see this changing any
time in the near future.
This is what happens to superpowers. The Romans did it, the
British did it.
You become the reserve currency and it leads to arrogance. You
don’t think the rules of economics apply to you. However, they
do apply.
The market will teach the politicians and the Fed a lesson, but
by pushing the dollar lower and sending commodity and gold
prices higher.
About the Author:
David Skarica
David Skarica is a member of the Moneynews Financial Brain
Trust.
Click
Here to read more of his articles. He also writes the
Gold Stock Adviser. Discover more by
Clicking Here Now.
© Moneynews. All rights reserved. To subscribe or visit go
to:
http://www.moneynews.com