The Real Reason Why Europe Keeps Raising Interest Rates
Thursday, March 15th, 2007
By Michael Lombardi, MBA for Profit Confidential
If we were to look at a chart plotting U.S. interest rates, U.K. interest rates, and Euro Zone interest rates, we would see a clear pattern: The U.S.’s lead as having the highest interest rates of all the G7 countries is coming to an end.
The Bank of England, with a current bank rate of 5.25%, is expected to raise its trendsetting bank rate to 5.5% by early spring. The Euro Zone just raised its key interest rate to 3.75%, with economists and analysts expecting that rate to go up to 4% by the summer.
While the European Central Bank was quoted as citing various reasons for the raising rates (including the usual inflation worry), I see a different picture of what’s developing. And it’s not a pretty image for the U.S.
Because of its economic woes, the U.S. will need to lower its interest rates soon in order to stimulate the economy. However, if the Federal Reserve takes such a step, the damage on the U.S. dollar will be significant. Why would foreigners (especially the Japanese) buy U.S. T-bills when they can buy bonds from the U.K. and the stable members of the Euro Zone that pay a higher rate of return? The last economic problem the U.S. needs is the euro and pound rising in value against the greenback.
Europe’s central bankers sense what’s happening. They see the U.S. economy softening… they know the U.S. will need to lower its interest rates in order to shore up the economy… they see firsthand how gold prices just continue to rise. And, like vultures, the European central bankers are moving slowly “against” the U.S. dollar.
Could you imagine a world where euros are demanded for oil instead of U.S. dollars? It would be a catastrophe for America. Like a chess game, we might be “checked” to raise domestic interest rates in order to maintain the supremacy of the U.S. dollar as the world’s reserve currency: Another reason why I believe the U.S. economy will not recover any time soon. In fact, these events just add more ammunition to my theory of a severely contracting U.S. economy ahead.
Next Post: Heed High-Volume Plunges as a WarningPrevious Post: There is Hope in the Markets!
Tags: euro, interest rates, U.S. dollar, U.S. economy
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
