Another week, another $1.25Tn.
That’s the way the Global Markets function these days as RUMOR has it that Germany will now bow to International pressure and allow the “permanent” ESM Fund to be” temporarily” doubled from to $1.25Tn extending the due to expire EFSF and combining with the existing ESM. That then, in theory, will prompt the IMF to put in $1Tn of their own (40% US money!) as Christine Lagarde has said she would not advocate increasing IMF resources to help reinforce the euro zone firewall unless EU countries act convincingly first.
This “great” news sent to the Euro and the Pound up half a point this morning and turned the EU markets from down 0.5% to up 0.5% as Europe, once again, is “fixed.” It also “fixed” oil prices, which were in danger of slipping back below $106 this morning but now back at $107 and that’s still not enough because the S&P says if Russia can’t get oil up to $120 a barrel, there is no way they can balance their budget this year and each $20 below that mark will cost Russia a notch of credit ratings.
On the other hand, according to the IEA’s Chief Economist, if Russia gets their $120 oil – it’s the rest of the World that will plunge into a Global recession. The IEA estimates that the EU will spend a record $502Bn this year on net imports of oil, up from $472Bn in 2011. That represents 2.8 per cent of the bloc’s gross domestic product, whereas between 2000 and 2010 it was spending on average 1.7 per cent of GDP on oil imports. The US will spend $426Bn on imports (2.7%), Japan $198Bn (3.6%) and China $251Bn (4.1%) while India is spending 5.9% of their GDP just on imported oil. The IEA notes that every recession in industrialized nations since WWII have been preceded by spiking oil prices.
That has not stopped Bernanke, this morning, from giving a speech where he once again hints at additional Fed easing and that has rammed our futures up (8:30) to the day’s highs but pretty much exactly where I predicted they would be when I set shorting targets in this morning’s Member Chat at 7:10, when I said:
Dollar rallied back to 80 and now is back to 79.67. The rally didn’t
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