28 April 2010

Currency Wars: Markets Shudder on Downgrade of Spain

There was unusually heavy put buying yesterday in NY markets on the Spanish stock index ETF.

Lzst month a group of US hedge funds were investigated for collusion in planning short selling assaults on the euro. Having exhausted the developing world, which has largely tossed them out, have the economic hitmen finally turned on the developing world as we forecast in 2005 that they would?

This is not to say that Greece, Portugal, or Spain are without problems or fault. There is a general crisis in many of the developed country fiat currencies, including the United States. The rising price of gold and silver, despite the heavy handed manipulation by a few of the banking centers, is a sure sign of a flight from paper controlled by central banks.

The US financial interests have been shown to exercise a disconcerting amount of control over the three US-based Ratings Agencies. I wonder how long it will be before any of the US states will have their credit ratings downgraded, and how those attacks might be structured. I am sure the government would then act to curtail their naked shorting and market manipulation activity.

As the NY based stock tout crowed on Bloomberg this morning, "The US can inflate its way out of this crisis much more easily than can any other country." Well, it is an advantage to own the printing press, and to control key elements of the global financial system.

And it makes one wonder how long the economic predators will be given free rein by the co-opted regulatory agencies and government in the US, which cannot even pass a motion to debate financial reform to the floor of its Senate. I would suggest that the debate, even when it moves forward, will not produce anything sufficient to promote a sustainable recovery. That is why this debate must move now to the floors of Parliaments and legislative bodies in the rest of the world. And there has to be much more openness compelled from their central banks with regard to private dealings with the US Federal Reserve. It is now a matter of national priority.

Wall Street Journal
Euro Drops To New One-Year Low On Spain Downgrade

By Bradley Davis
April 28, 2010

NEW YORK (Dow Jones)--The euro dropped to a new one-year low Wednesday as a ratings agency downgrade of Spain sent a rush of fear through markets that a sovereign debt crisis was spreading across the euro-zone periphery.

The euro dropped to $1.3129, its lowest level since April 2009, on Standard & Poor's downgrade of Spain's long-term debt, which was accompanied by a negative outlook. The downgrade follows S&P's slicing of the ratings of Greece and Portugal Tuesday, which sent the euro plummeting.

"The deep-seated nature [of the euro-zone sovereign debt crisis] is only now being realized by the markets," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J, "and we're looking at a potential funding crisis" of government and corporate debt in the euro-zone periphery "in the not too distant future."

Other ratings agencies are likely to follow with additional downgrades, analysts said, which will send the euro even lower...