America embarks on a new journey today, buoyed up on hope, inclusiveness, trust. Perhaps wrongly, I am not as optimistic, but I think the world will see that optimism and inclusion are very good things economically and there will be some timely Obama bounces all over the place.
I mentioned in my New Year's forecasts that the spotlight would soon turn to Europe; it is on us now. Ambrose Evans Pritchard in the Telegraph refers us to the social problems in the former Eastern bloc countries on the Baltic and in the East, where their fixed exchange rates to the over strong euro are causing unemployment figures of over 20% and widespread social unrest. It was a condition of their joining the EU that they signed up to the euro and the pre-euro purgatory of fixed exchange rates. And that social unrest will spread. Did you know that over 1,000 cars were torched in Paris alone on just one night - New Year's Eve? The eurozone's fourth largest economy, Spain, has lost its AAA status (the third largest, Italy , was downgraded twice a while back and is down at A+) and Greece, despite being in the euro, is getting down towards junk bond status. The euro will survive in one form or another, but it may well not be the same form within 18 months.
Keep an eye on what German politicians are saying - don't forget that it was Germany's refusal to say anything calming which led to Britain's (most felicitous) departure from the Exchange Rate Mechanism.
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