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Watch Global Currency markets. Country bankruptcy ‘endgames’.

Posted by Adrian on October 27, 2008

Hungary, Ukraine, Argentina, South Korea are countries that could cause a domino effect (within their regions) of risk aversion and panic, sending ‘interconnected’ economies into free fall. Bank of Korea just slashed rates down 0.75%, now siting at 4.25%. The South Korea Won has been hammered in the currencies markets, the barometer of a country’s economic situation is their currency. The Won is indicating that South Korea is going to be hit hard by the major consumption economy (USA) prolonged recession , this may cause the rest of Asia to go into a meltdown. Hence Asian markets liquidating stocks and running out of stocks into the Japanese Yen, powering the Yen to all time highs. This has caused the Yen to be favored over the Euro, which as one point was at 1.66 Yen on November 6th 2007, the Euro now is facing down, a good chance it could bounce off 1.00 Yen. This by no means indicating that the Japanese economy is booming, in fact Japan is a country that is so negative with an ailing stock market, the general market that doesn’t know where the bottom could be – the Nikkei could go much lower before any kind of rebound.

Nikkei (225) 23 yr graph, note the highs in 1990 just shy of 40,000 points, through to the current 7,649. That is 18 years of losses (long term)!

The Japanese YEN like the US dollar are considered low risk as opposed to the EUR, it could be surmised that European economy is collapsing more dramatically than Asia and the US. Ukraine just being bailed out by the IMF, Hungry cold be next and other European countries namely Eastern European could all start to face the reality of defaulting. Of course the big question is Russia’s economic situation?

If there is an ‘endgame’ in the markets would could see whole countries go bankrupt, a global slump with a slew of countries that are broke, from the Americas to Europe and parts of Asia

The constant reminder of volatility in the market is the intervention of all the global central banks and governments; this intervention is of course delaying a huge invertible outcome. Thus at the same time causing a market to become even more jittery.

One can solely blame intervention by global governments and central Banks for the volatility, check the VIX out:incredible.

The market simple can’t find a bottom. With a accelerated global slump occurring the worst thing the central banks and governments can do is pump money into the system and cut interest rates.

Especially with the extreme market volatility with emerging and developed economies currencies.

A range of currencies will be sold off dramatically in the market, if Argentina or a European country or countries start knocking on the IMF door. If South Korea looks for a bailout package, expect the Australian Dollar and New Zealand Dollar to crash below current supports. With the AUD most definitely heading below 0.60.


2 Responses to “Watch Global Currency markets. Country bankruptcy ‘endgames’.”

  1. […] there anything worth investing in Japan? Stocks are 20+ years of ‘going nowhere’, JPY is volatile (maybe a sell ’short-term’), property (is history). The whole economy […]

  2. […] discussed in Watch Global Currency markets. Country bankruptcy ‘endgames’., we are either going to see stagflation come back quicker, maybe at some point in 2009; or there […]

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