Monday, 9 March 2009

Markets are like Justice, Impartial

Two headlines struck me in today's DT business. "Overvalued Euro set to plunge 'within months'" by Garry White and AEP's piece headlined "Thanks to the Bank (of England) its only a crisis; in the eurozone it's a catastrophe"

AEP writes on how the ECB is behind the curve and how the PIGS's economies are suffering because of ECB's interest rate and hence forex policy and also the ECB insisting there is no danger of deflation in Europe. White's piece tells how the spread betting companies are reporting huge wave of trades shorting the Euro. The CFTC figures show in the last net short positions against the Euro by speculators and hedge funds doubled from 10,081 to 19431 contracts. This will get hedged into the futures market bringing down the Euro futures rate and gradually impacting the spot rate. The markets are doing the ECB's work for them and the markets will save the PIGS if the EU bureacrats allow them to function. The same applies in the UK but King is not as savvy as Trichet.

It all reminds me of the figure of justice on the top of the Old Bailey in London, blindfolded with the scales of the market, sorry justice, in her hand. The markets are blind to whom they help or hinder by their judgements. Written round the bottom of the cupola are the words, "Punish the wrongdoer and defend the children of the poor". Pure humbug but clearly the wrongdoer is Fred the Shred and the defender of the poor Gordon Brown or so the spinmeisters want us to believe.

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