Subprime crisis : After the financial sector, the next victim is the US Dollar

Contrary to today's declarations made by those very experts who yesterday firmly rejected any idea of a possible 'subprime related global financial crisis', the US Dollar will be the main victim of the exchange rate's major reassessment ahead of us.

For instance, contrary to what the mainstream financial media advocates these days, the ECB is not pumping huge amounts of liquidities in the Eurozone. It is injecting huge amounts of liquidities into the international banking system through major European banks all of which are global financial players. Those "Euros" are mostly transformed in US Dollars and channeled to the US which is the core of the current global liquidity problem. By doing so, it helps the US Federal Reserve as it allows it to do less liquidity injections (preventing a stronger panic in Wall Street where the key troubles are located); and on short term it allows the ECB to get rid of an internal political pressure regarding a 'too strong Euro' as it technically generates a short term EURUSD decrease.

But the economic outlook for the 2nd semester in the USA is worsening (as stock revenues were the last major source supporting US consumers spending - see GEAB N° 9 as well as June 5th's Decoded News US economy: Perfusion by Fed and Wall Street conceals recession, thus confirming LEAP/E2020's anticipations of a recession (recent data from the Philadelphia FED, as well as the continuous collapse of the US building sector, already point in that direction ); while the Eurozone will only face a slowdown (see GEAB N°16.

When the 'dust' of the current financial market collapse will settle down, operators will see that the US economy is whirling down, while the Eurozone has essentially wheathered the storm. Asia will then be in a very uncertain position namely due to consequences of the financial crisis on exports and currencies, as the USD will resume its spiral downwards."

More in GEAB N°17 (September 16th, 2007)