Wednesday, October 22, 2008
Currency crisis developing
Countries that do not have access to Fed loans are seeing their currencies spiral into a freefall. The Hungarian central bank raised its benchmark interest rate by a full 3-percent overnight (now at 11.5 percent) to try to defend the Forint.
Although the ECB has access to the Fed and dollar loans, Eurozone banks may still be very short of dollars and this could cause a similar spiraling down of the euro. The ECB may actually be forced to raise interest rates to defend the euro, causing even more damage to the Eurozone economy.
This is the endgame for the euro and we could be witnessing its coming apart.