If Richard is right the US smokes Europe!
- U.K. jobless claims unexpectedly fell in February at the fastest pace since 1997. (Bloomberg)
- China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP. (Bloomberg)
Quotable
“The first thing a man will do for his ideals is lie.”
Joseph A. Schumpeter
FX Trading – If Richard is right the US smokes Europe!
Last month, we did notice that US consumer credit rose unexpectedly. It didn’t seem to get much press, as all eyes were focused on non-farm payroll.
The question is: Is a snapback coming? Yes, answers Morgan Stanley’s Richard Berner [our emphasis]:
Private credit demands are poised to rebound, following a record-setting bust over the past 18 months. The bursting of the housing and credit bubbles promoted massive loan losses that decimated the capital at leveraged lenders, forced deleveraging of intermediaries' balance sheets and promoted the most severe credit crunch in 70 years. In our view, that sudden withdrawal of credit availability, which actually began in the fall of 2007, was the primary factor promoting recession. Conversely, we also believe that the ebbing of the credit crunch has encouraged economic recovery, aided mightily by aggressive policy stimulus. But the sharp decline in credit demands continued in the fourth quarter and has yet to reverse.
That reversal is coming. While it has been painful and is yet incomplete, the credit crunch has promoted a financial purging and healing process that has been even more rapid than we expected ten months ago when we last estimated system-wide credit losses. Household deleveraging and rising wealth have substantially restored balance sheet health and, coupled with increasing income, have given consumers more wherewithal and confidence to borrow again. For its part, Corporate America will likely soon start accumulating inventories and boosting capex, perhaps sooner than expected. We expect that the combination of rising household and corporate credit demands and massive Treasury borrowing needs will put significant upward pressure on real yields in 2010-11.
If Mr. Berner is right:
US growth smokes Europe. It’s unlikely the average European consumer will snap back while mired in the midst of austerity. It means rallies in EURUSD are opportunities to sell the pair at a better price
Stay tuned.
Related Posts:
- Credit Crunch to Linger ... Longer? 10:52 11 August 2009
- Bad day of the dollar 07:31 24 June 2009
- What Happens in Europe Stays in Europe 09:51 23 October 2009
- Stronger Dollar simple logic we think! 14:36 01 October 2008
- Change in Gold-Dollar Correlation 11:32 06 November 2009
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