Whew....We Made It

Posted January 02, 2009

The euro declined against the US dollar as interest rate cuts loom shortly ahead. Slovakia celebrated becoming the 16th nation to join the euro.


There is an old song by Crosby, Stills, Nash & Young called “Almost Cut My Hair” that has one line of lyrics that sums up 2008 leading to 2009. It says, “It increases my paranoia, like looking in my mirror and seeing a police car”. In this metaphor, 2008 is the police car chasing us right into 2009 because the financial “crimes” of 2008 have yet to be tried and convicted in the recessionary markets. In other words, we don’t know for sure how long the global recession will last, what the ongoing consequences will be of the massive interjection of public money into private businesses (in any form of government), and if there are any more surprises waiting to be uncovered.

There is general agreement though the markets will continue to be volatile for at least 6 months and maybe 12 months which means both equity and currency markets will experience unpredictable swings. The police car will eventually catch up with the perpetrators of this financial war and peace will be restored at some point in 2009. Financial analysts are predicting the recession will begin to turn around by the end of 2009. But right now, all you can really say about 2009 is….

Whew! We made it…

There are plenty of people who are glad to look in their rear view mirrors and see 2008 behind them. There were even celebrations going on related to currency. Slovakia met the requirements for joining the European Union and became the 16th nation to join the euro zone. The country was so pleased to become a member of this stable financial union they held a ceremony with fireworks and a rock concert. Slovakia and Slovenia are the only two countries that were previously communist to join the EU to date. Czechoslovakia hopes to join by 1/November/2008.

Rock on Slovakia!

The euro has been surging the last two weeks against the dollar and the pound, but yesterday weakened due to more poor economic expectations. The euro slid to $1.3919 versus the US dollar and to 126.53 yen. The European Central Bank is planning on lowering interest rates again to make another attempt to jumpstart the economies of participating nations as the European manufacturing report shows a deepening recession.

The US dollar also strengthened against the UK pound ($1.4601) as Great Britain struggles with an economy continuing to decline. The weakening of the euro included against the sterling also. In fact the British pound breached 98 pence against the euro which was the first time this has happened. Some analysts are predicting a rebound is in the works for the pound.

In other currency news, the Brazil real weakened against the US dollar to R2.3314. This is in response to continued export declines or a weak trade balance.

One bright spot on the economic horizon is found in Sweden. Sweden’s economic reports are showing a more recession-resistant economy than found in the euro zone. As a result the Swedish krona strengthened against the euro to 10.9250 krona per euro. It also strengthened against the US to 7.7805 krona per US dollar.

The 2008 police car chasing the new 2009 calendar year contains one serious and expected problem yet to reach fruition in the banking systems. The number of business insolvencies looms as a real threat to efforts to stabilise the