EUR/USD Rally In Danger Despite Fresh Stimulus Injection May Be The Beginning Of A New Beginning. But Will It Be Enough? As the political, economic and social forces in the Western world continue to converge on a closer alignment, markets tend to follow the dictates of common sense, common reason and common human nature. As long as governments and central banks around the world continue to artificially prop up their currency values, the market will “continue” to strengthen. If the current monetary policy environments remain firmly entrenched, there may be more of an opportunity for investors and traders to make gains.
The European recession is an unfortunate confluence of factors. At this point, there is no path for monetary or fiscal stimulus to deliver real growth and “get the job done” that the governments of Europe have promised to enact.
So what should European government officials do? Well, the answer to that question depends on how much they can bribe their citizens with, and how much they have already paid out in bailout money, or tax payments. After all, it’s not like they had some positive money printing going on there.
Furthermore, there is no point in pretending that the European monetary union is designed for a smoothly running fiat money system. There is no such thing as a guaranteed inflation rate in the future. The Euro’s profitability is a direct result of its biggest users, the German and French, mismanaging their financial budgets.
And it is understandable why so many American consumers don’t trust the governments of the European Union in any situation, but especially in a “crisis” such as the European crisis. People are afraid of terrorism, losing their jobs and being locked out of their own countries. They see governments as incompetent, corrupt and unable to keep their promises.
And Europe is in debt because their excessive spending (which almost everybody acknowledges is the cause of the current financial woes) has inflated the value of the Euro in the short term but has also hurt the European Sovereign Debt longer term. This does not bode well for the future of the Euro, even though many believe that eventually it will recover its pre-crisis value.
The risk factor with the Euro is that it is too large to be widely accepted as a global currency, and that there is simply no real “market” for it. We will probably not see a larger global reserve currency for years to come. If you don’t think so, you must have been living under a rock the last twenty years.
The main drawback of the Euro is that it is only “recognized” as a viable international currency by one country (Germany). Meanwhile, there are many different nations around the world who now use the Euro as their central bank reserve currency. Meanwhile, France and Germany are not only in debt but also have a huge trade deficit with the rest of the world.
So the big question is: When will the Euro turn back to being a viable reserve currency again? The reality is that there is nothing that the current leaders of Europe or the Greek prime minister can do to avoid the fact that Greece is currently facing insolvency.
Greece is now just one country away from becoming “normal” once again, which means that Germany and the others must take steps to stop the process, or the repercussions will be truly devastating. for the European economy as a whole.
The Euro is no longer a “safe haven” currency. We will soon see if its days are numbered.