A weaker dollar?

If we look to the States it’s amazing to see how the shape of the financial landscape has changed since August 2007. Rates plunged from 5.25% to zero, the fiscal deficit went up from 2% to 13%, mortgage rates went down to 4.50% from 6.5%, the FED balance expanded from 850 billion USD to 2 trillion USD and we can go on.
David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, points out that there is one policy tool that is practically unchanged since two years ago … the US dollar. “It is the only policy tool that has not budged one iota since the crisis erupted two years ago. But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, it would make perfect sense for a country that always operates in its best interest - even if it may not be in everyone’s best interest - to sanction a US dollar devaluation as a means to stimulate the domestic economy,” he said.
Why is there no devaluation?
It ‘s called deflation. The D-word is a bad thing for owners of debts. They have to run for the hills and in doing so they’re looking for dollars to pay off everything which is dollar denominated. Another support is coming from the fact that different entities are still forced to show appetite for dollar assets. If they let the buck slip, the value of their dollar assets will be hurt.

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We repeat: the US is not Japan... or is it?

I still remember those days that Greenspan assured us that never ever the US would be submitted to a Japan-like slump. No way would a deflation à la Japan hit the States. Moreover, the United States couldn’t afford to wait deflation out the way the Japanese did/do: too many people who owe too much money to too many creditors. But hey, there we are: falling prices, big output gap, rising unemployment and credit losses that surpass the monetary and fiscal stimulus in a huge way.

And the government is trying to prop up the creditors. Just like they did in Japan. The banks have gotten trillions in loans and guarantees. Is this stimulating the economy?

Hehe...

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Someone want to buy a house in Spain?

Can you stimulate an economy with a printing press?
Japan is trying it for almost 19 years now, so the answer is obviously: ‘no’.
Printing money is issuing debt. And printing more debt cannot reverse a debt bubble until market forces have run their course.
The trend for this very moment is deflationary. And almost all asset classes are down, because the economy is readjusting.
Not only in the States, but everywhere.

From Reuters:

MADRID, June 16 (Reuters) - The number of houses sold in Spain fell by 47.6 percent in April compared to a year earlier, marking the largest percentage fall in 16-straight months of decline, the National Statistics Institute said on Tuesday.The fall in April sales to 29,217 units compared with a decline of 24.3 percent in March versus the same month of 2008, which had been the smallest fall in 11 months.


Moody’s downgraded 25 Spanish banks last Friday.
The unemployment rate in Spain is now 17.4% and is expected to go higher. The non-performing loan rate is still going higher: from 3.3% in December 2008 to 4.27% at the end of March 2009.

The Ronaldo effect?

Now what about this ad, back in the UK:

DON’T MISS OUT ON THE OPPORTUNITY OF A LIFETIME

UK house builder Taylor Woodrow de España, the only major UK house builder in Spain, discusses why the time is now right to purchase a home in Spain as the current climate makes purchasing the home of your dreams possible.
Victor Sague, Marketing Director of Taylor Woodrow de España comments: “For many months consumer confidence in the property market has been dented and quite frankly who can blame house hunters becoming subdued when it comes to making possibly the biggest investment of their lifetime.
However, at this moment in time we are currently seeing a number of people returning to the market, anxious not to miss out of some of the excellent deals that are currently available both at home and abroad.
Victor continues: “With the market looking brighter, this will of course add inflationary pressure onto house prices, the moment confidence returns. Indeed, house hunters that are unable to move quickly will know doubt miss out on the chance, of possibly their lifetime, to buy at the bottom of the market.

Indeed :-), plenty of houses over there now. We're not in a hurry

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