The Finance Foundation
Reinventing capitalism for all
AUTHOR
Michel
Gabrysiak
President of the Finance Foundation

King dollar is back. I almost feel like writing hallelujah!
November 20, 2014 , Michel Gabrysiak - Financial Markets
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Mohamed el Erian, in a comment to the Guardian, explains that it has soared by 7% against the euro and the yen. The rally is the result of a genuine economic progress in the US, and a lack of economic progress in Europe and in Japan. The US are outperforming Europe and Japan in terms of economic growth and dynamism. Mr el Erian  is right to say that economic flexibility and entrepreneurial energy are much, much higher in the US than in Europe. Add to it the systemic refusal of the Europeans to work more in order to contribute to economic progress.

         One factor may change this: The desire of Mario Draghi, the ECB president, to expand his bond capacity by 1 trillion euros. But Germany does not agree. So will it happen? Interest rates will play a role as well. The American rates are climbing. The European are not. 

         This should increase the value of the dollar and decrease that of the euro.

There is no doubt that it should be on par with the dollar or much, much lower. Then things may change drastically. 

 

 

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