Ralph Shell @ 1:57 PM, Monday June 07 2010
With the Bilderberg 2010 elites huddled in meetings, trying to decide what is best for the world, and the G20 Finance Ministers assembled in Busan, South Korea, the Brits, rather than wait for advise from those two groups, chose to forge ahead with their own fiscal solutions. Chancellor of the Exchequer George Osbourne, a participant at the G-20 meetings, said he was pleased with the communique's regarding budget reductions.
Prime Minister David Cameron, at a weekend speech said that the deficit will grow to where it cost £70B per year in five years to service that debt. Cameron continued as quoted in the TIMESONLINE:
"Is that what people work so hard for, that their taxes are blown on interest payments on the national debt? What a terrible, terrible waste of money. So, this is how bad things have got. This is how far we have been living beyond our means. This is the legacy our generation threatens to leave the next.”
Mr Cameron argued that the boom under Labour was an illusion. The boom in financial services was a mirage, he said, because it was “conjured from years of low interest rates, cheap money and a bubble in the price of assets like houses.”
It remains to be seen what the plan will accomplish. There is noisy opposition to the plan by those receiving the dole, as well as those fearful of losing their jobs, in the bloated civil service. Others oppose the plan because it increases the capital gains tax, and maintains the very high income taxes.
Last weeks market weakness was, as we suspected, reason for the bear pundits to return. Roubini did, showing up in Europe where he spoke about the euro when he said in moneynews.com:
"There is that risk, at least for the euro zone. Growth will fall toward zero. Even if that is perhaps not a real recession, it will feel like one. Greece was just the tip of the iceberg," he said.
"And the Americans too will run into the wall at some point if the carry on the way they are," he said in the interview published in German.
The euro made a new low early but had a recovery bounce, but the pound did not keep pace, continuing to gain on the weak euro. It is interesting to note last week's COT report for, futures only, showed the large spec short 55.1% of the total open interest, was in the pound. Their short position in the pound is bigger as a percent of the total market than it is in the euro. We favor the long side of the pound in the 1.44 range. If the market begins to perceive some of the Tory plans to reduce the deficit are implemented and helpful, this should help the pound. When are where the big specs chose to exit the market is a mystery.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.