Wednesday, April 09, 2008

Musical Chairs

Key takeaway from this article:

"U.K. house prices dropped the most since 1992 last month as the seizure in worldwide credit markets made mortgages harder to obtain, a report by HBOS Plc showed. While manufacturing unexpectedly rose in February to the highest since 2001, the Confederation of British Industry says the Bank of England needs to reduce the benchmark interest rate tomorrow.

``The Monetary Policy Committee is still odds-on to cut,'' said Paul Dales, an economist at Capital Economics Ltd. in London. ``The better news on the U.K.'s industrial sector does little to offset the dire news on the housing market seen in recent days.''

The pound weakened to 80 pence per euro for the first time earlier today after the consumer confidence report. It traded at 79.85 pence at 11:13 a.m. in London."

With traders, former politicians (doubtlessly using the media to float "opinion balloons" to constituents regarding interest rate cuts), and economists all pining for a BOE rate cut, the stage is set.

My position on the U.S. dollar and S&P 500 stocks should be clear. Just now the rest of the western world realizes that they are playing a different game and competitive devaluation is the only move they have.

It is only a matter of time before the EU is forced to play "catch-up" to the rest of the world's declining interest rates and depreciating currencies...or there will be no seat for them once the music stops.

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