Thursday, August 8, 2013

After You, My Dear Alphonse

Interesting talk about Europe starting to recover as evidenced by earnings reports better than expected. And news of China's better than expected exports sent metals higher. Copper particularly strong.  China here

The thought occurs to me. Nearly every country on earth is gaming the currency market in order to weaken their home currency to gain an export advantage. But with the world economy weak it is hard for anyone to gain an advantage because currencies are valued against each other and everybody is up against zero percent interest rates. But what happens if economies start to pick up. Then we are no longer "pushing on a string". Currencies will be able to fall if interest rates do not pick up, or are not allowed to pick up. But who will go first in raising interest rates and therefore allowing their own currency to rise?

The situation could be dangerous. No country wants to slow their own growth or their job creating exports by raising the value of their own currency. Except maybe China who is working on becoming a domestic consumer. But they will move slowly.

It is about time for the gold shorts to get squeezed anyway.


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