So argues AEP in his latest piece in The Telegraph published last night. Not exactly a new discussion but worth re-addressing in the wake of a euro wobble last week.
This year’s burst of euro strength has baked a lot of future damage into the pie and brought that crisis closer. The European Central Bank has the apparatus to head off the deflation risk and force the euro back down at any time. All it needs to do is to end its contraction policies, meet its own 2% inflation and 4.5% M3 money targets, and fulfil its primary EU treaty obligation to promote “balanced economic growth”, “employment”, and “general interest” of the Union.
Plenty more under discussion here from the always interesting Ambrose-Pritchard including the argument ( correct in my view ) that China and other central banks have created a potential monster by it’s USD diversificaton into the euro.
China’s central bank has been buying fistfuls of euros as it accumulates a world record $3.7 trillion in foreign reserves, and its motives are not entirely friendly. So have the central banks of Russia, Brazil, and the Mid-East oil sheikdoms, all aiming to cut reliance on the US dollar, part of a $9 trillion build-up in reserves that has flooded into the euro with tidal force
I have noted many times here the constant euro demand from the Asian cental banks ( ACBs) and others, and I can’t see that changing any time soon.
But it doesn’t come without a price.
