Traders Fear Chinese ‘Bubbles’

The big story on the screens this morning comes to us from China where inflation has reached a 16 month high. These dramatic headlines have sent currency investors heading back to the Japanese yen and US$ as many of these stories suggest the Chinese will be stepping in to slow the Chinese economy. But if you look beyond the ‘16 month high’ headlines, you will find that consumer prices rose just 2.7% in February from a year earlier, and increase yes, but hardly the stuff of a ‘bubble economy’. Premier Wen Jiabo has stated a goal of keeping inflation around 3%, so the inflation number is still below his goal. And the Chinese have already started pulling liquidity out of the Chinese banking system with increases in the reserve requirements and internal interest rates.

Strong Chinese Exports Cause Aussie Dollar to Soar

Yesterday’s price action in the currencies versus the dollar was a drag, man… We did, however, see the higher yielding currencies begin to move away from the pack of currencies led by the euro (EUR). That move higher by the likes of Australia (AUD), Brazil (BRL), South Africa (ZAR), and others, carried over through the overnight sessions, so, as we start today, they are stronger versus the dollar… In fact, the Aussie dollar is near a 7-week high this morning.

Wall Street Snubbed in European Sovereign Bond Sales

It looks like US banks are losing the opportunity to earn fees on the roughly $500 billion in planned European debt offerings this year. It probably shouldn’t come as a big surprise, given the less than savory details that emerged regarding Goldman’s relationship with Greece, and the series of black eyes the euro currency has been enduring as a result of sovereign debt-related instability.

US Credit Rating: Who Will be the First to Downgrade?

During World War II, there was a saying, that, “loose lips, sink ships”… I think Greek Prime Minister, George Papandreou, should have taken those words to heart yesterday… You see, the currencies, led by the beleaguered euro (EUR), were rallying, and the single unit was nearing 1.37, when Papandreou made a statement that sunk the rally’s ship… He said, “Greece’s debt problems could soon spread to the rest of Europe and mean a weaker euro”

From the Greenspan Put to the Kohn Put: Our Brilliant Central Bankers

Federal Reserve Vice Chairman Donald Kohn announced his retirement on March 1, 2010. In his obligatory lament, Federal Reserve Chairman Ben S. Bernanke was half right: “The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn.” What is good for the Fed is generally not good for the country. The influence of Donald Kohn supports this view.

European Monetary Fund: You Heard it Here First

Well… After a couple of weeks of waiting, and wondering if it was going to print or not… There was a very nice article in The Wall Street Journal on Saturday that featured… Me! And my Pfennig! I’m sure that most of you missed it, so if by chance you would want to read what Jeff Opdyke had to say about me and the Pfennig… Click here.

How the Greek Debt Crisis Affects You as an American

As the Greek debt saga unfolds, you’re likely questioning how it affects you… as an American. The connections are not always obvious, but today an article helps explain how some consequences of Greece’s debt mismanagement could ultimately hit US shores.

From the Washington Post:

Sovereign Debt Worries Lighting a Fire Under Gold

It’s almost never a good idea to follow a crowd, but it’s certainly wise to be aware of where it’s headed. In today’s case, a Bloomberg survey has shown that some 73 percent of surveyed traders believe that sovereign debt problems in Europe may serve to boost the price of gold. More below…

China Dumping US Debt Could be Great for America

Providing the world’s reserve currency has its privileges. Not the least of which is the continued willingness of foreigners to soak up the massive amounts of debt issued by the US despite the nation’s continued debasement of the dollar.

Yet, what if the foreign nations stopped buying? We’ve certainly heard of the calamity that should result from China cutting the US off, but perhaps we shouldn’t be so certain that’s the case.

Germans to Greeks: Sell the Acropolis, Parthenon, and Your Aegean Islands

The rhetoric is heating up between the Germans and Greeks. In the latest episode, two German politicians told Germany’s bestselling Bild newspaper that Greece should set about selling assets to work down its debt, including publicly-owned uninhabited islands, and national historical treasures like the Acropolis and the Parthenon.

Underreported Money Supply may be Disguising Hyperinflation

Is annualized M1 money supply growing at three times the rate the Federal Reserve is reporting?  This is a critical question recently explored by Zero Hedge, which believes the actual growth rate of US dollars “is approaching hyperinflationary levels.”

According to Zero Hedge:

Greek Spending Cuts Lead to Civil Unrest

What a day the currencies had yesterday! The euro (EUR) gained ground all the way back to 1.3730 (but saw some profit taking at the end of the day) and all the other currencies followed in step… Now… There’s two ways to look at this… Either the euro is like a star that’s getting ready to burn out… (It always shines brightest before it burns out), or… It’s like a star that had been covered up by another planet, and is coming back into view!