Mish's Global Economic Trend Analysis

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Numerous High-Level French Government Officials Pressure ECB to Weaken Euro Posted: 10 May 2014 05:11 PM PDT Various high-level bureaucrats in the French government including prime minister Manuel Valls, finance minister Michel Sapin, and industry minister Arnaud Montebourg, are all singing the benefits of a weaker euro. Please consider France Steps Up Campaign to Weaken Euro. France's socialist government, struggling to reverse a 15-year decline in French competitiveness, is growing increasingly vocal in its calls for action to weaken the euro. Paris will have been encouraged by the statement on Thursday by Mario Draghi, head of the European Central Bank, that the strong euro was "a cause for serious concern" given low inflation and low growth – and his hint of action next month. But it is seeking more than just looser monetary policy from the ECB. Led by new prime minister Manuel Valls, ministers have insisted in recent weeks that eurozone political leaders should take up the exchange rate issue – in defiance of German insistence that it must be left solely to the central bank. Mr Valls said President François Hollande would pursue the issue with fellow leaders after the European elections at the end of the month. "The ECB is responsible, but it is not the only one," Michel Sapin, the finance minister and confidante of Mr Hollande, said this week. He said the EU's council of ministers should discuss the issue. Arnaud Montebourg, the outspoken economy and industry minister, took up the cause in parliament on Wednesday saying: "The whole issue of exchange rate policy is one for political authorities, according to EU treaties." Two Obvious Problems Nearly every country in the world wants to increase competitiveness by devaluing its currency. Mathematically, it's impossible for every country to do that simultaneously. A bigger problem for France is that it is not competitive with Germany in nearly every industry, and Spain and other European countries in other industries. Devaluing the Euro will do absolutely nothing to improve French competitiveness within the eurozone and that is precisely where France most needs to improve competitiveness. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Playing With Fire Posted: 10 May 2014 08:52 AM PDT I still believe there will be some sort of diplomatic end to this crisis, before war breaks out between Russia and Ukraine (see Negotiating a Diplomatic Solution in Ukraine: How and Why That Will Happen). In the meantime, sanctions are extremely counterproductive and the west demands Russia rein in the separatists, even though Russia is clearly not in control. ZeroHedge has an interesting story this morning Ukraine Scrambles Fighter Jets, Intercepts Airplane Carrying Russian Deputy Premier. We were one foolish shot away from starting a war, something supposedly no one wants. This is pure idiocy but Obama no doubt views the result as a success. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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