QUESTION: Marty, you mentioned that the euro would first rise in opposition to the greenback and that might result in a wave of deflation in Europe. Are we near the reversal on this development that you just mentioned could be the second half of 2026?
FD
ANSWER: The philosophy between the US and Europe relating to foreign money are polar-opposites. The US at all times needs a weak greenback to promote extra widgets abroad, and Europe continues to be residing within the shadow of World Struggle II the place the currencies had been ranging from zero so a rising foreign money they see as proof of their restoration.
Thus, a powerful greenback and weak euro is exactly reverse of the political targets in each camp. The Plaza Accord was all about forcing the greenback decrease in 1985 for commerce. They had been speaking the greenback down however then in 1987 they bought along with the Louve Accord and proclaimed the greenback went down sufficient. The greenback had already turned down earlier than the Plaza Accord.
When it continued to fall, that’s what induced the 1987 Crash as a result of the market all of a sudden realized that the central bankers might NOT management the foreign money. These individuals are NOT succesful to controlling the FOREX markets.
We’re getting there. It gained’t be lengthy now. Simply watch the Arrays. Europe goes to impose capital controls. They’re attempting to eradicate all commerce with the USA as a result of Trump is in opposition to struggle with Russia, which they see as essential to survive. The want to ban all software program from the USA and they’re attempting to ban VISA and Mastercard as nicely. They’ve been pushing the Promote-America Commerce, however that is all going to backfire on them.
Financial development within the USA for 2024 was about 2.6% in comparison with 1.1% for the EU. They’re lifeless final in financial development among the many prime 5 main economies. They’ll impose strain on funds to promote US belongings and return to Europe, however we advise a few of the largest establishments in Europe and they’re NOT shopping for it. The capitalization of simply the NYSE is greater than ALL of the European Exchanges mixed. The US continues to be the one place to park big cash. Most of our European institutional purchasers have hedged the foreign money threat for now.
