Goldman: Pound to hit 15-year highs against the euro – Telegraph

English: Exchange rate evolution of the euro c...

English: Exchange rate evolution of the euro compared to USD, JPY and GBP. Exchange rate at start is put to 1. Green: in Jan-1999: €1 = $1.18 Red: in Jan-1999: €1 = ¥133 Blue: in Jan-1999: €1 = £0.71 (Photo credit: Wikipedia)

This is an amazing projection from investment bank, Goldman Sachs, published in the Telegraph. Check it out!

via Goldman: Pound to hit 15-year highs against the euro – Telegraph.

Of course, the immediate question is ‘Why?’

Well surely it’s because the UK is doing so well economically under David Cameron & George Osborne!

No, it’s because the Eurozone is in such a mess thanks to Germany‘s hard-line on fiscal flexibility and worries about Germany guaranteeing open-ended quantitative easing from the ECB!

Personally, I think that the UK’s post-election bad news is not reflected in their projections.

Similarly, the Eurozone has probably bottomed, with some flexibility on fiscal policy in return for structural reforms in labor markets; also the ECB is getting bolder.

Thoughts?

The wacky economics of Germany’s parallel universe – Wolfgang Münchau – FT.com

This is an outstanding, must-read article by Wolfgang Münchau, published in the FT. Check it out!

via The wacky economics of Germany’s parallel universe – FT.com.

Having been close to this subject for over three years, I commend Wolfgang Münchau on his clarity of explanation.

Personally, I agree with the conclusions namely:

Germany is exporting ordoliberal ideology to the rest of the single currency bloc. It is hard to think of a doctrine that is more ill suited to a monetary union with such diverse legal traditions, political system and economic conditions than this one. And it is equally hard to see Germany ever giving up on this. As a result the economic costs of crisis resolution will be extremely large.

In recent months, I have been respectful of the German position that Southern Europe (including France) needs structural reform, like freeing up labor markets. I have been optimistic that with a little genuine structural reform from Southern Europe, Germany will countenance massive Keynesian stimulus in the form of investment. This is further supported by the European Commission’s changed position too.

Now I fear that I am close to admitting defeat. With Germany still at the economic helm in the Eurozone, it will be continued pain for all. Once again, the winners will be the privileged and the wealthy. If economic policies are unworkable, there will soon be social and political crises – this will include the increasing power of both the Far Left and the Far Right of the political spectrum.

Thoughts?

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