Saturday, Oct 25, 2008
The financial crisis is spreading like wildfire across the former Soviet bloc
Telegraph: Europe on the brink of currency crisis meltdown
Currency pegs are being tested to destruction on the fringes of Europe’s monetary union. “This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America. Exposure is 85pc of GDP for Austria, 50pc for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this round. Whether you realise it or not, your pension fund is sunk in Vietnamese bonds and Indian steel magnates. Didn’t they tell you?
8 Comments
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1. little professor said...
I thought it was the dollar that was going to collapse? At least that's what Peter Schiff and all the goldbugs have been saying for the last twelve months. Now it turns out it's the rest of the world's currencies that are getting pwned. Why?
2. Gardeniadotnet said...
Ouch.
(The) truth will out.
3. sold 2 rent 1 said...
LP,
This event will cause the final capitulation of gold, world IRs to be slashed in half and money printing to go into hyperdrive.
The EUR, USD and GBP are doomed; the order of collapse is the big unknown
4. Home Counties Expat said...
I couldn't believe it the other day..
Earlier this year 1 pound was worth 220 YEN.
I checked the other day and now it's 1 pound to 145 YEN. My salary looks quite nice now in pounds but if I transfer any money over here... well I'll be getting bucket loads less.
Unbelievable difference in such a short time - how much lower is it going to go??
Actually , can someone explain in laymans terms why even though the stockmarkets in Japan and England have both taken a hammering, it's only the pound that's suffering and not the YEN. I thought that as Japan has a 0.5% interest rate, it would be more likely that the YEN gets weaker??
Is it basically because the UK has over exposed itself to lending dodgy credit more than Japan?
(I flunked out of my A-level Economics course a while back.)
5. rotten tomato said...
@little professor
The reason why the US $ has incresed in value over the last month is because as the hedge funds liquidate all their positions (that's why markets are tanking everywhere) to cover their losses, they buy dollars as that's the currency those losses have to be covered in. Hence the temporary rise in $ demand and price. However when this is over, I wonder if we will not see a hyperinflationary wave and a $ collapse, following other curencies...
6. uncle tom said...
I also suspect that the reasons for the dollars current relative strength are as much technical as rational - but it has only dropped to a level that reflects spending parity across the pond, it is not over-valued yet.
I don't think we should be too worried about investments in asia, as their trade surpluses needs to be corrected by a rise in their currency value.
However, the old soviet bloc countries are economic basket cases, and money loaned may never be repaid. In Latin America they have some history of defaulting on loans, so if the Spanish banks have been pouring in funds, they are even bigger fools than I thought.
Santander is too good to be true - you heard it here first..!
7. Tom101 said...
Oh well not a good time to have an Abbey Small Business accout then....
8. Fjcruiser said...
The Euro is doomed. Besides Latin America, Euro is the last bastion of currency pegging which is doomed to collapse. Watch this space.