QE3

Marc Faber’s Holiday Cheer – The Whole Derivative Market Will Go to Zero

With his usual holiday cheer Marc Faber’s most recent interview had him slamming the derivative markets. In an interview with Reuters he went over his predictions for 2012 which calls for more monetary easing, QE 3 etc. He also continues to worry about the growing EU sovereign debt crisis and the lack of real solutions. This was confirmed today after the ECB announced more banks than previously known tapped liquidity lines to the tune of $600 billion.

Of course his long-term views are decidedly bearish. He thinks people in 5 years time will have maybe 50% of their money. This wealth loss will be due to either equity collapses or inflationary pressures due to monetary easing. Obviously political solutions are out of the question at this point. One can look at the US government and see utter dysfunction. The GOP led house has refused to extend a tax cut due to lobbyist pressures on certain pet projects. Then in the EU you have France and the UK with increasingly cold diplomatic relations.

“I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don’t know: you can postpone the problems with monetary measures for a long time but you can’t solve them… Greece should have defaulted – it would have sent a message that not all derivatives are equal because it depends on the counterparty.”

Looks like 2012 is shaping up to be another interesting year. The Mayans may be wrong about the end of the world, but if Marc Faber is right we won’t be able to tell the difference.

Full Interview is below.

Euro Moves Higher as Euro Central Bank President Shifts Focus From Greece

The euro moved 0.54% higher against the dollar at $1.4363 today as traders are optimistic about the upcoming vote on austerity measures in Greece on Wednesday. The European Central Bank President, Jean-Claude Trichet, shifted the focus from Greece to the fighting Europe’s inflation after he hinted at interest-rate hikes in the future. Trichet was quoted by the Dow Jones Newswires as saying he is in a “strong vigilance mode” on inflation. Many analysts expect that this will mean a rate hike on its key lending rate when it meets on July 7.

Analysts also agreed that the French bank plan proposed on Monday, which would allow Greece to pay back their debts to French banks at a slower rate, has helped calm the market and counters the risk of default over the next few years.

The DXY fell another 0.27% today as the dollar fell against most major currencies. The Australian dollar is up 0.91% against the dollar and the British pound is up 0.01% against the dollar. The dollar did however gain ground against the yen, up 0.32%.

Depending on how the Greek austerity vote goes will determine how the euro trades later this week. Also many currency traders now believe QE3 is not as likely as previously thought and are adjusting their positions.

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