Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Crisis Focus Turn: To Currencies, and EuropeYves Smith posted yet another absolutely essential entry on how the focus on the crisis is rapidly turning to currencies, and on what some of the responses might be as the crisis becomes acute. Reuters indicates S&P futures are trading up in early Monday Asian trading. From the post:Stephen Jen, currency chief at Morgan Stanley, says 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. ... Yves again. Now the meltdown may resume Monday, but another scenario may play out. Recall 40 nations (EU and Asian) met in Beijing over the weekend, endorsing Nicolas Sarkozy's call for a revamping of international banking regulations and more coordinated, tougher supervision. None of this directly addresses the looming currency crisis, but the markets sold off badly Friday, and if there is any stabilization or reversion on Monday, the backing away from the abyss plus the hope that the next phase of meetings, scheduled for November 15 in Washington DC, might ameliorate the situation, may put the currency crisis in abeyance for a couple of weeks. ... In this fraught environment, for China visibly (and the key is visibly) to start buying other currencies would have a disproportionate effect on psychology (and be rewarding to China, since it would profit from the rally it helped engineer). That might stem the panicked capital flight, and while it is probably insufficient to restore real stability, it could keep a necessary (and painful) revauluation/readjustment process from morphing into a rout. Read the post Labels: currencies, financial crisis, Yves Smith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
