Spanish 10-year bonds touch 7%, Greek bank withdrawals accelerate, Italian borrowing costs surge. Name your headline coming out of Europe and it is bad. Why is the euro at the top of its range for the past three weeks?
In a word the Fed, the US central bank. American statistics over past two weeks have made a third quantitative easing program far more likely. There is nothing quite as effective in devaluing the dollar as the Federal Reserve printing press.
The May jobs report was dismal. Today unemployment claims rose (unexpectedly again) and prices went down in May. Inflation is not a threat and unemployment is. The Fed’s twin mandates of price stability and full employment are moving in the same policy direction, toward further monetary easing and a weaker dollar. The situation is tailor made for another Fed attempt at stimulating the economy, even without adding Ben Bernanke's deflation bogey.
The Greek elections are this Sunday. If they vote to negate the European austerity agreements the probability of Fed action moves that much closer to certainty.
In a word the Fed, the US central bank. American statistics over past two weeks have made a third quantitative easing program far more likely. There is nothing quite as effective in devaluing the dollar as the Federal Reserve printing press.
The May jobs report was dismal. Today unemployment claims rose (unexpectedly again) and prices went down in May. Inflation is not a threat and unemployment is. The Fed’s twin mandates of price stability and full employment are moving in the same policy direction, toward further monetary easing and a weaker dollar. The situation is tailor made for another Fed attempt at stimulating the economy, even without adding Ben Bernanke's deflation bogey.
The Greek elections are this Sunday. If they vote to negate the European austerity agreements the probability of Fed action moves that much closer to certainty.
