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Thursday, April 2, 2009

ECB Rate cut!

G-20 induced rate cut was called after the first meetings of the G-20 leaders.

Most likely they got on the phone and said to Trichet--Obama said cut that rate. Forget about your inflation targets. You won't have one unless America gets it's rate cut for the Euro-zone.

The report from the FT says that it was due to the recession (yea, yea, yea) and primarily, due to Germany's falling exports. Sounds a little fair about the exports. Sounds like EU domestic protection. If tariffs or NTB's (non tariff barriers) are raised, then we would have a full scale war on our hands--trade war.

I am one who feels that rate cuts, should go hand in hand with deflation at this time. And, not just rate cut for the sake of cutting a rate--but, quantitative easing, to ensure a boost in private stocks. If stocks aren't deflating, then the need to cut a rate comes down to access to money for the domestic market.

I guess this is what they meant by a "coordinated" response. Because, we can't have one major G-20, cutting rates right left and centre--but the other, not cutting rates, bulking up their currency and then, leaving the possibility for protectionism.

Protectionism is on the rise, as many authors have stated--Razeen Sally, being the chief one.

Where does this take us? We don't know. But, it is taking us somewhere. And, the moral of the story is, when the US comes to the EU, things, happen!
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