20dmf rt

[ilonaross]

@Timothy:

Please elaborate... for the dismal science-challenged folk like me.

tnx

[bh_trade]

Thank you Pascal for these intraday updates. Very helpful to see the charts in close to real time. About the only thing I noticed was the increase in money flow as the market fell off slightly over the mid-day doldrums and I think the strong close was a result of that

[Timothy Clontz]

@Timothy:

Please elaborate... for the dismal science-challenged folk like me.

tnx

Because we exist in a world of fiat currency, inflation of one currency correspondingly deflates another. This is most true in the case of the dollar and the euro. When the US Fed inflated the dollar (i.e. devalued it) during QE2, that caused the euro to deflate (i.e. increase in value).

Since Greece's primary economy is focused on maritime activity, the increase in the value of the euro REDUCED demand in the US for European goods, which caught Greece like a vice by drying up its primary economic drivers. Even worse, the debt Greece owed also increased in value even as their ability to pay it was derailed.

You'll also note that the Fed's QE2 exported inflation into emerging economies that were tied to the dollar, which was most keenly felt in the Arab world, where fully 35% of per capita income was needed just for food. The surge of inflation caused people there to no longer afford food, and so they rose up against their governments in order to meet their most basic needs.

Ben Bernanke caused the so-called Arab spring by dollar inflation in economies pegged to the dollar.

Ben Bernanke ALSO pushed the PIIGS to the point of no return (faster then they would have anyway), by euro deflation (as a side effect of dollar inflation).

MORE monetary loosening by the Fed might be a temporary fix to the European banking crisis, but only by making the soveriegn debt crisis even worse.

Generally exchange rate effects show up in the following quarterly earnings reports, so the pop UP in this quarter MUST have an equivalent pop DOWN in the following quarter unless Europe takes action IMMEDIATELY to devalue their own currency through monetary easing.

Tim

[ilonaross]

@Tim:

Tnx