EU-DIGEST

The Hyperinflationary Depression - by Eric deCarbonnel

Federal bailouts have worsened things. Dollar creation exploded. Crisis has been pushed into the future. Its enormity will be far greater, and foreign investors will get stuck with a lot of it. When it arrives in strength, capital outflow will follow, and dollar valuation will plunge with it. Williams believes that “both central bank and major private investors know that the dollar is going to be a losing proposition. They either expect and/or hope that they can get of (it) in time to lock in their profits (or for central bankers) that they can forestall the ultimate global economic crisis” as long as possible. Dollars are very vulnerable in this environment. If Treasuries are dumped, the Fed will monetize debt to make up the difference. Inflation will then accelerate, multi-trillion dollar deficits will worsen things, and a “self-feeding cycle of currency debasement and hyperinflation” will follow. Cash as we know it will disappear. A barter system and black market will replace it or possible introduction of a new currency. Since most money today is electronic, not physical, chances of it adapting “are practically nil.” With hyperinflation, electronic commerce would completely shut down and economic collapse would follow. Gold and silver will be invaluable. Holders could exchange them for goods and services.

Physical goods will also be precious for survival and as a medium of exchange. Anything with a long shelf life may be stocked in advance, and providers of essential services could barter them for goods and other services. Forewarned is forearmed. Safety and liquidity are crucial. Anything retaining value is essential. Real estate, other currencies for example. Foreign equities and debt to a small degree because US financial assets hammering will spill everywhere.

Labels: Balance of Trade, Inflation, US, World Economy

Eurozone inflation retreats to 3.6% in September

Annual inflation in the euro zone fell to 3.6 percent in September, retreating from its record highs in the previous months, the European Union (EU)'s statistics bureau Eurost at estimated Tuesday. Pushed by hiking oil and food prices, the eurozone inflation has been on increase in the past year. It peaked at 4.0 percent in June and July, the highest since the European Central Bank (ECB) started 12 years ago collecting inflation data for the countries which began to use the euro in 1999. Analysts said the easing of price pressure in the euro zone was mainly due to recent drops of oil prices, but the figure remained too high for the 15-nation bloc sharing the same currency, which is facing increasing risk of recession.

Labels: EU, Eurozone, Inflation

Europe Inflation Accelerates More Than Estimated, Reaches 3.7% - by Fergal O'Brien

The inflation rate in the euro area rose to 3.7 percent last month, the highest since June 1992, from 3.3 percent in April, the European Union's statistics office in Luxembourg said in a statement today. That is higher than the 3.6 percent estimate published on May 30. Soaring commodity prices have pushed up costs for companies and consumers across Europe and at the same time damped spending and threatened economic growth. European Central Bank President Jean-Claude Trichet this month said the ECB may raise its benchmark interest rate a quarter point in July, setting aside concerns about the economy's expansion to combat the fastest inflation in 16 years.

Labels: ECB, EU, Inflation

EU food prices climb double the rate of inflation

Food prices in the European Union rose by more than 7 percent over the past year, almost double the rate of inflation, the EU said Monday. Some of the EU's poorest members, in eastern Europe, have been hardest hit. Several experienced percentage increases in food prices that were in double digits. In Bulgaria, the cost of food increased 25.4 percent in the 12 months ending in April. Latvia saw a rise of 21.7 percent and Estonia of 18.3 percent over the same period.

Labels: Economy, EU, Food prices, Inflation

Inflation showed no signs of slowing in Europe or the United States last month, according to a rash of data released Wednesday, and the euro rose to another record against the dollar amid expectations that central bankers on either side of the Atlantic will react differently.the EU statistical agency, said inflation in the 15 countries that share the euro rose 1.0 percent in March from February, and by a record 3.6 percent from a year earlier. The agency had previously reported March inflation of 3.5 percent, also a record. Adding to the European Central Bank's inflation worries was the news Wednesday that some 550,000 chemical workers in Germany had won a pay deal worth 8 percent over two years - the latest in a series of similarly sized packages in Europe's largest economy. "The times of wage restraint in Germany are clearly over," said Dirk Schumacher, senior European economist at Goldman Sachs.

"Food and energy prices are going up on a global scale," said Jörg Krämer, chief economist at Commerzbank in Frankfurt. Both in the United States and in the euro zone, he noted, rising food and energy costs added 1.6 percentage points to March inflation.

Labels: EU, Inflation, US

Germany's Merkel says strong euro has advantages

German Chancellor Angela Merkel said on Tuesday that the high level of the euro reflected the strength of the European economy and has advantages as well as disadvantages. "The strong euro is a sign of the strength of Europe. It has advantages and disadvantages. The disadvantages are talked about all the time," Merkel told reporters at a news conference. "The question is whether we should try to change the euro rate without regard to price stability. The answer to that is a clear no."

Said Merkel: "The ECB, whose main priority is fighting inflation,is the only major bank in major industrialized countries currently contemplating the possibility of increasing interest rates, even as worries persist about the fallout from the U.S. subprime lending crisis. The ECB's price stability policy is supported by us," Merkel stressed. She pointed to Germany's "firm rule that the European Central Bank's independence should not be called into question by any political pressure."

EU-Digest comment: Mrs. Merkel is right on target. The ECB is doing a great job and the way to fight inflation is not to reduce interest rates. Europe does not need the economic disaster the US is experiencing.

Labels: ECB, euro, Germany, Inflation

On the day that U.S. investment banking Morgan Stanley announced a larger-than-expected fourth-quarter loss because of subprime write-downs, European Central Bank chief Jean Cleade Trichet gave investors a stomach-turning reminder that he simply wouldn't be able to fight the squeeze on borrowing costs by cutting interest rates in the eurozone. The problem is rising inflation, something which, if not kept under control, could have an even more damaging effect on the European economy than the subprime mortgage crisis."Looking ahead, the inflation rate is expected to remain significantly above 2% in the near future, and it is likely to moderate only gradually in the course of 2008," said Trichet. That means the European Central Bank won't cut interest rates until well into 2008, unlike the U.S. Federal Reserve, or Bank of England, which have both cut rates recently. Unlike the ECB and the Bank of England, the Federal Reserve does not have an inflation target that it uses to for determining monetary policy, though it is currently debating adopting one.
Things are a little easier for the Bank of England, which also has a 2.0% consumer price inflation target, but is currently dealing with a CPI of 2.1%.

Labels: ECB, EU, Inflation

Euro-zone labour costs rise - inflation stable - by Aoife White

Labour costs in the 13 nations that use the euro rose 2.2 per cent in the first three months of 2007 compared with a year ago, the European Union's statistics agency said Thursday. The Eurostat agency also confirmed May inflation held steady at 1.9 per cent, signifying that wages are now growing ahead of inflation.

For more Eurostat information click on their link at the right-hand side of EU-Digest.

Labels: EU, Inflation, Labor