Notes From Underground: The Weekend’s Top News is, Surprise, Surprise, GREECE

Notes is going to REPOST an old piece just to remind our readers and the financial world that the games surrounding the GREEK DEBT situation has turned into a marathon of concern and an Ironman competition of lies and deceit. The European policy makers are attempting to delay what the markets have deemed to be inevitable and pretend that a Greek restructuring will not take place. The fact that the market has driven two-year GREEK RATES to more than 25% is of no consequence to the EUROCRATS of Brussels for, as usual, the political elite will continue the facade of “ALL CLEAR” as the PIIGS move from crisis to crisis.

In a weekend BLOOMBERG piece, the recent improvement in Spanish inflation was hailed as a great positive. The fact that Spanish UNEMPLOYMENT is more than 21% and the economy is being pressed on an austerity budget, the possibility of inflation in Spain is of absolutely no importance, especially because the Spanish authorities have no control of the currency.

Spain cannot devalue its way to growth, so the only way that Spain can regain any type of competitiveness in Europe and the world is to go through an internal devaluation, which is basically undergoing a severe wage deflation. Again, inflation in Spain is certainly not a concern for the foreseeable future. Today it is Greece. As Portugal goes to the polls in June and political problems arise in Spain and Italy, the costs of a Greek DEBT RECONSTRUCTING are only the beginning of the economic problems weighing on the mandarins in Brussels.

Tomorrow morning the Bank of Canada will announce its interest decision at 8 a.m. CST. Consensus is for no change as the strong Canadian dollar is expected to keep the BOC on hold. Today, the Canadian GDP was released and the data reflected greater strength than anticipated but it did little to lift the LOONIE as continued low interest rates are expected to keep the Canadian soft on the currency crosses. All in all, I still believe that the LOONIE is the most fundamentally sound of all the major currencies but with interest rates being the flavor of the month, other higher yielding currencies have been more in favor.

Also, the selloff in commodities has led to profit taking in long-held Canadian dollar positions. Also, the Russians announced that they were lifting some of the previous restrictions on grain exports so the wheat market is down in tonight’s trading activity. Will Russian exports be enough the hold down rising prices from increased global demand? This will bear watching to see if the Russian news is merely the cause of a short-term correction.

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3 Responses to “Notes From Underground: The Weekend’s Top News is, Surprise, Surprise, GREECE”

  1. ken Says:

    It seems no matter what the Eurocrats say and what people like you and I believe will happen, the Euro seems to be the choice over the US dollar which is an even louder statement. Good luck to us all!

  2. eric Says:

    Yra,

    I remember in 2007 that the concerns over Lehaman and housing were public, but no one seemed concerned until the crisis did indeed occur.

    I also remember that the day(s) before oil collapsed from 144 a barrel , Mr. Pickens was pitching windpower on the front of the USA Today.

    Today, Germany announced an end to nuclear power. Today the Euro and markets are king.

    History rhymes they say and doesn’t repeat.

    Regards, Eric

  3. yra Says:

    Eric—simon/garfunkel said it best—still a man hears what he wants to hear and disregards the rest–especially when they have so much financial and intellectual capital at risk

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