The 600 Billion Dollars From The Fed To Cause Financial Instability?!

Andra Marinescu

Written by Andra Marinescu
Posted in: Business
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Experts believe that the U.S. central bank’s action will further fuel discussions regarding the “currency war“. Applauded by the International Monetary Fund (IMF) and strongly criticized by German officials, the decision of the Federal Reserve (FED, the U.S. central bank) to invest $ 600 billion in the U.S. economic cycle as an additional incentive to re-launch the economy was greeted with joy in the world’s markets which felt a real euphoria yesterday. Amid the depreciation of the U.S. dollar, the European single currency climbed to $ 1.4250, its best performance since January this year.

Amid the echo still unquenchable American elections mid-term, which allowed Republicans to gain majority in the House of Representatives, and given that overseas media polling analysis of the consequences of economic reforms engaged by the Administration after the defeat Democrat Barack Obama, Federal Reserve announced it would buy long term bonds totaling $ 600 billion. Rumors on the institution’s decision to give new impetus to the economy around for almost a month and financial markets have experienced in this period, in anticipation of this decision.

The only unknown of the program aimed, initially estimated at 1.000 billion dollars. The first reaction came from Asia, where the MSCI index, regional barometer, reached the highest value of 28 July and the Tokyo Stock Exchange’s Nikkei index ended the session with an increase of 2.17%. Shanghai Stock Exchange has recovered, also 1.85%, a level not seen since April. There were no left inferior European markets. In Paris the CAC 40 index has exceeded the threshold of 3,900 points for the first time in the last six months. At midday yesterday, he won almost 2%. In Berlin, the DAX index has moved up at the same time, to 1.52%, while in London, the Footsie index posted a 1.71% advance, a first since June 2008.

Euro briefly passed $ 1.4250

Regarding the euro, it climbed to $ 1.41 immediately the first time yesterday and, then, to earn another 1%, going beyond $ 1.42, with a short trip to the value of $ 1.4250, before a slight depreciation of the mark. Against this background, the chief economist of the International Monetary Fund welcomed the gesture EDF. Olivier Blanchard described the U.S. central bank’s decision as “a bold measure, which will have positive effects. A view not shared but the German Minister of Economy, Rainer Bruder. He said the American decision to boost growth by injecting liquidity into the economy was a reason for worrying.

Bruder noted also that subscribe to the views of critical U.S. strategy, consisting of green bill rate by influencing monetary policy, and said the anguish of many forms of protectionism in the developing world. In this context, international analysts have noted that the G20 summit on 11 and 12 November, in Seoul, will be discussed including the issue of “currency war” theme which, they say, will now be seen through the EDF decision, which gives a foundation for the euro appreciation, the effect on activities of the export / import.

Will oil reach $ 90 per barrel?

Weakening U.S. dollar will affect, certainly, the price of raw materials. The proof is, in fact, made the jump in gold and oil. After several falls and downs, the yellow metal regained its vigor, climbing to $ 1.372 an ounce, a figure that is far from the historical record of $ 1.387, recorded in the middle of last month. Experience has shown recent months, however, that the yellow metal is capable of climbing the right striking, breaking, as happened in the first half of October, record after record without any problem. Analysts expect, therefore, like other metals, not only precious but also the basic advantage of access to the weakness of U.S. currency to rise in value.

The advantage, however, the oil, which reached London yesterday at the InterContinental Exchange, $ 87.46 per barrel, up $ 1.08 from the previous day quotes. At the same time, electronic exchanges in New York Mercantile Exchange (Nymex), Black Gold brand “light sweet crude (WTI) climbs to $ 85.88 per barrel, an advance of $ 1.19.”After a moment’s hesitation, the net dollar weakened, while, simultaneously, the price of crude oil on U.S. stock markets has increased,” commented Filip Petersson, an analyst at SEB bank. It did not exclude the possibility that the new conditions, “Brent oil price escalade try a threshold of $ 90 per barrel,” which never happened in October 2008.11

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