England's White Dragon

England's White Dragon
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Wednesday, 26 October 2011

Europe’s troubles will also result in an increased fiscal burden here in England

Europe’s troubles will also result in an increased fiscal burden here in England on already burden English tax payers.

The EU partner’s members always play the blame game
When times are getting tough, you can either band together to create a strong united front or start turning on each other. Unfortunately, at the weekend European leaders chose the latter like always, the EU cannot be trusted far too many fat cats getting rich of the backs of the poor, sitting on their fat back-sides doing nothing but coming up with stupide rules and regulations and burdening tax payers with all their rubbish, and now the British prime minister Dictator David Cameron has become one of them?

The sooner England pulls out of the EU the better off English tax payers will be, and the sooner Cameron leaves office the better off England will be and rid of this farcical coalition half-witted government whose only real interests are self-interest and not the peoples interests, nor the will of the people as this week vote on pulling out of the EU was denied the people by a very clear dictatorship and not a democracy.

Playing the blame game while the crisis in the Euro-zone continues to fester is nothing but a distraction. Meanwhile, it allows the European Union sceptics to gain traction sensing weakness at the lack of a solution. This is the 14th crisis summit over the Euro-zone in 21 months. Whether they'll stop bickering and join together to find a solution today remains to be seen, but a solution seems very unlikely because the euro could never work it was an idea doomed from the start it was an idea to make others richer and others poor which is the only thing it has archived, the euro was doomed because every country in it had its own public spending policies and that they all spent the money on no common sets of public spending, and now we see the crash of the doomed euro and we can only be thankful here in England we didn’t get involved in having here.

The sheer size of the problem means there is no simple answer. Finance ministers were shocked at the weekend to discover the Greek money pit could be as much as €252 billion by 2020, if bond holders don’t agree to share the burden.

The implications of the crisis in the Euro-zone, has extend far beyond it. The staid economies of Japan and Switzerland are having to fight a rear-guard action to prevent their currencies becoming too strong. The only reason markets aren’t pouring their money into these currencies is because they know the central banks’ reaction will be to print more money to keep the yen and franc down at reasonable levels.

So the only solution is to turn to the dollar, which continues to strengthen despite the fact that the US economy is also in dire straits. And why the dollar and not the pound because the US is the puppeteer master pulling the puppets string and David Cameron has no back bone and has now become a Col. Gaddafi type of dictator himself but unlike Libya who took years to revolt England will only take month until a volt takes place?

Sabrina Derrough at HiFX notes: “The dollar seems to be reflecting anything but the situation inside the US; instead, it has become a barometer for everything outside the US. And of course a strong dollar has always been in the US interest only.”

With such a large internal market, America doesn’t have to rely on exports for growth and, therefore, it doesn’t have to cap its currency.

As William Poole of FC Exchange explains: “The fear that the debt crisis will push the world back in to recession has stemmed the desire for risk around the world. This in turn has been translated into a vastly stronger dollar and yen, and, until recently, a supercharged Swiss franc. On the flipside, any currency linked with the exports of commodities has suffered as traders grow weary that reduced global output will dampen demand for raw materials.”

The Euro-zone crisis isn’t only lapping at the shores of the commodity currencies of Australia, Canada, New Zealand and South Africa. It is also affecting Asia, and even mighty China.

“If the Europeans fail to make meaningful inroads on resolving the debt crisis, China and the remainder of Asia will be hurt both directly and indirectly," says currency strategist Ilya Spivak at FXCM. "Taken together, the Euro-zone is China’s largest trading partner. That is why China has been buying European bonds: it needs a stable and prosperous Europe to secure export demand.

“If the Euro-zone fails on the debt crisis, Chinese as well as the larger Asian region will be hurt because it would unleash another credit crunch. Indeed, even if that doesn’t materialise, the sheer uncertainty spreading across the markets is bad enough to seriously dent the confidence of global business and slow growth. That is an ominous prospect for the export-oriented Asian economies whose fortunes tend to rise and fall with the global business cycle.”

“The euro’s strength over the past two years has been as much about interest rates as it has about sustained Asian demand,” says Alistair Cotton from Currencies Direct.

“Money printing in America has seen huge amounts of dollars accumulated by Asian central banks begin to flow into euros as they try to diversify their holdings. If European leaders are able to show that the euro does have a long-term future, it will have obvious ramifications for the other safe haven currencies like the yen, Swiss franc and US dollar because of the depth of liquidity in the euro-denominated capital markets and also the perceived hawkish stance of its central bank.”

The euro’s resilience could also be seen as an indication of how bad the economic crisis is worldwide, or a mark of confidence that European leaders will eventually come up with a workable solution.

Given that the principle players – France and Germany – can’t even agree, this confidence could be seen more as hope triumphing over experience rather than a reality. The bad temper displayed over the weekend is a sign of their exasperation with each other and the non-euro members of the European Union.

As Nick Ryder from Smart Currency Exchange says: “Those at the centre of leading a solution (France and Germany) are becoming more and more exasperated as bail-out plan after bail-out plan fails and their leadership of the crisis comes under increasing scrutiny from other EU members.

“The 10 ‘non-euro’ members of the EU should be at the meetings as decisions made have a direct impact on their economic prosperity – especially given the complex web of lending and borrowing between all EU members. The ideal solution is that a Greek default is ring-fenced and managed properly and the ECB/ EFSF/ IMF provide a nuclear deterrent to prevent markets going after other vulnerable PIIGS countries. However, any such moves will require trillions of euros of firepower that will put the finances of France and Germany under increasing scrutiny.”

And what about the England

Michael Derks of FxPro says: "Personally, I see the England drifting economically and politically away from Europe over the coming years to some extent, because of the immense financial constraints that the latter will be under. At the margin, this may help the pound, although Europe’s troubles will also result in an increased fiscal burden here in England."

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