Why Euro will fall further

Why the Euro Is Set to Fall Further ...
by Jack Crooks


Is anyone less thankful this year than last year? It's probably safe to bet on YES.

I don't have to run through it all — we've been bludgeoned by all that's bad in the global economy and financial system all year long. And I'm sure there are plenty of individuals out there who aren't quite in the mood to be thankful — turkey on the table or not.

Last week I discussed the effect of tight coupling on financial markets. I said when the mechanics of some market or some asset of immense complexity becomes loose, it's liable to create a downward spiral for all the moving parts tightly coupled with it.

That's exactly what's happening. And it means ...

Assets Collapse, Markets Crumble and Capital Flow Shifts as We Enter an Ice Age

Governments are taking all kinds of efforts to bailout key institutions and contagious markets.

They understand the severity of the cleansing cycle that's begun; and are very afraid of what they see.

Eventually though, they're going to have to take their economies, and the financial system, off life-support. If not, after too long, they may be left with a system incapable of organic growth.

In the meantime, Mr. Consumer is starting to get very worried. His wealth has been hammered by lower housing and stocks, and now his job is either already gone or in jeopardy.

This fear is leading to a major uptick in savings. That means spending takes a back seat. And in the end, global consumption takes a hit.

A very smart guy named Stephen Roach, Chairman of Morgan Stanley Asia, recently commented on the economies of Asia and how they're faring in this environment. He said:

"[There is] no country in Asia that is either not declining, or in recession, or slowing sharply. No one is spared. [They're the] most linked region of the world for the rest of the global economy."

Bingo!

He went on to say China is "slowing very, very sharply."

You see, China has come to represent a very important middle-man between developed and emerging market economies — in Asia and across the globe. Their low-cost, cheap-labor production model entails gobbling up input products and raw materials from emerging economies in order to satiate the demand from developed economies.

Signs that China is in trouble stem from, among other items, collapsing demand for the stuff they produce. And the ramifications of China slowing down will spread far and wide.