Jan

17

 I was reminded today that when the U.S was downgraded in the summer U.S. bond yields went down. Despite the moves by European officials spreads continue to widen, etc. Furthermore, some of the starlets of the pageant like Ireland are now beginning to tire. While I think the movement in prices in Europe and the Euro are far from complete it is not too soon to consider the knock on effects and feedback mechanisms throughout other currency pairs globally. Consider the size of European GDP (along with the US and Japan at the very least below trend growth) and the impact on the world via trade, sentiment, growth, etc. The math is not dissimilar to the impact of mortgage equity withdrawal, housing, consumption as it impacted U.S. growth and through the U.S. the rest of the world.

Paolo Pezzutti writes:

Europe will drag the US into a recession. Unless markets accept further QEs from the fed, ECB and why not the Chinese. This because the only acceptable way for equity markets is ti go up in this situation? What is the limit to central banks balance sheets? If this solves the problem in the short term to politicians ans at the same time provides profits to corporates and keeps alive banks, it looks like the holy grail. Except that at some point someone has to pay the bill? But when?


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