From past records, the US Fed policymakers injected quantitative easing (QE) stimulus at final quarter of 2008, 2010 and 2012. For the three rounds of stimulus implementation, the dollar weakened and pulled up the euro. Simultaneously, the cheaper value of greenback spiked up the global equities, real estates and commodity prices.
The first two rounds of stimulus injection triggered a fierce pull up of market price trend. The euro currency averagely increased about 2,000 pips against the dollar. However, the third QE policy announced in November 2012 only lifted the market by about 1,000 pips in appreciation.
Many market analysts commented that the global markets have become immunised to the printed hot monies created by US government. It is true that traders are seeing stagnation in DJIA benchmarks and Asia asset prices. The European markets are not expanding at regular pace anymore other than just seeing Germany and Britain growing. Perhaps, this is the reason why the US Fed has adopted a new plan to initiate the withdrawal of stimulus to reshape the macro economy.
Until now, most consensus generally think that the euro debt crisis is over. Maybe that’s because they have not heard of such news anymore or rather, the media have stopped reporting the negativities.
No one bothers to go and dig how much debts are owned by the 17 nations in eurozone. Yes, Estonia is the 17th nation to add into the grouped economy.
As of end December 2013, the debt to gross domestic product (GDP) ratio of the eurozone was recorded at 90.6 per cent US$12.195 trillion. Effectively, that is about US$10 trillion deficits owned by a group of countries supposedly to be the largest economy in European Union (EU). Unfortunately, the story is never a bed of roses since each and every country is run by its by its own central bank with different Treasury yields and notional value.
If we look into the separate entity of eurozone, Germany is definitely above all and striving well in its economic performance. On the flip side, Italy is holding debt at 127 per cent of GDP, Greece at 125.9 per cent of GDP, Portugal at 124.1 per cent of GDP, Ireland at 117.4.per cent of GDP.
The other three major economies like Germany, France and Spain are recorded at the borderline of 85 per cent of their GDP. In my opinion, if the debt limit exceeds 100 per cent of GDP and fails to be suppressed down, it will be a matter of time when the red figure will explode beyond redemption.
Dar Wong is the principal consultant of APSRI. The expression is solely his own. He can be reached at [email protected].