To begin with, just over a week ago, the Swiss unpegged their Franc from Euro. Long the most stable currency in Europe, they finally dropped their peg (a fixed exchange rate) and the move immediately shook the financial world. It triggered a rush to Swiss assets for safety. EU and German banks got hammered. The Euro's exchange rate immediately dropped 30% . Gold went back up to $1300 and silver jumped to $18. (BTW, both metals are off to pretty big starts this year.)
In light of this (IMO) the European Central Bank announced a new round of bond buying - quantitative easing or monetary creation. The ECB said it would combine purchases of government bonds with an existing smaller program of private bond purchases, to create 60 billion euros a month through September 2016. All told, the program will amount to 1.1 trillion euros ($1.16 trillion). The aim, of course, is to revive the EU economy. As many have pointed out, they're going to fix the problem of over extended credit by extending more credit - exactly the same as fixing a hole by digging it deeper.
The Euro is down against the dollar, it's almost 1:1 and I don't recall it ever being there, there's virtually a full tilt currency war going on, and the dollar is the 800 pound gorilla in the room. Strange that it seems to have started with Obama essentially declaring he was going to crash the dollar. Weaken it to the point where our exports increased greatly. The problem with currency wars is that no one wins and everyone loses. Currency wars don’t create growth; they just steal it. Growth is stolen from trading partners until those trading partners steal it back with their own devaluations.
Yemen has collapsed as a nation - to the extent that it really was one to begin with. Worse yet, it appears that Iran is involved.
Saudi Arabia has lost one King and gotten another. The combination of Yemen and Saudi Arabia pushes the region further into some deeply disturbing directions. Last week, John Robb posted a plausible scenario of how ISIS leverages a successful assassination of Saudi general into collapse of the Kingdom and how that could prompt global economic collapse - today's sub-$50 oil bounds up to $150 within a few months. The death of King Abdullah probably makes that even more likely, as Robb reports today. Even worse, he sees the possibility that ISIS captures and flips the Kingdom of Saudi Arabia!
PS: If this doesn't occur, ISIS missed the opportunity, and we're all better off for their mistake.One of the more plausible explanations for the Saudis driving oil prices down is that it pressures their old enemies: Iran and Syria (Sunni vs. Shia, round 9 million). It punishes Russia for helping Iran, both of whom are economically hurting from it, and it also hurts ISIS who gets funding from selling their stolen oil. If the Saudi hand is ripped off that figurative valve by the ISIS jihad, do you think $50 oil stays?
PPS: ISIS is a theocratic network of networks that is both entrepreneurial and dynamic. The KSA is a theocratic hierarchy that's risk averse and inflexible. Which one wins?
Iran! Like many others have said, Iran and other countries see us as a weak country now and are likely to be thinking they need to take their action against Israel or us soon, before a stronger leader takes the reigns again. I think the Iranian general that the Israelis took out this week could have been in the vanguard of putting plans into action.
Iran’s brazenness, or audacity, goes further. While a desperate-looking US administration tries to advance talks over the Iranian nuclear program, the regime in Tehran continues to run a wild foreign policy throughout the Middle East. Though the regime’s income has fallen dramatically in the wake of the drop in oil prices, Tehran is still investing huge sums of money taking control of new assets in the region, from Afghanistan to Libya — almost the territory of the ancient Persian empire of Ahaseurus.Hezbollah, for its part responded to the Israeli strike by saying they're preparing for war in the Galilee region of Israel. Galilee is in the northern part of Israel, near the Golan Heights and Syria. I spent a few days there last August.
“If the highest level of Hezbollah commanders were in the Golan Heights and the high level of Iranians, it means that their idea, [what] they’re planning could be a kind of operation, an act against Israel on a high level,” Reuven said during a conference call Monday organized by the Israel Project (TIP). “It’s significant, the high level of this meeting, of this reconnaissance of the Iranians and Hezbollah.”In the meantime, Obama has transferred almost $12 billion of your tax money to Iran; no doubt helping fund their development of atomic weapons. This past Wednesday they paid $490 million in cash assets to Iran and will have released a total of $11.9 billion to the Islamic Republic by the time nuclear talks are scheduled to end in June. Good thing we keep paying them even when oil is down, or they might not be able to arm Hezbollah to keep killing Israelis and whatever US troops they can get to.
encourage saving for college? Increasing taxes on the people who already pay the most? The image of the Fabian Socialists was that the world needed to be heated up so that it could be re-forged and remolded to their desires.
Hot enough for ya?