The flood of cheap printed money of the European Union raises the value of gold and intensified global trade relationsThe euro plunged to its lowest level since 2003.
The president of the US investment bank Goldman Sachs Gary Kon and global financial and political elite gathered at the World Economic Forum in Davos. Mario Draghi, President of the European Central Bank (ECB) announced plan of additional printing of more than 1.1 billion euros from March 2015 to September 2016.
Immediately after the publication Dragi, the euro plunged to its lowest level since 2003, while gold and silver prices rose immediately.The euro has lost in 2014. 18 percent of its value against the US dollar. Only in the last 30 days, the euro plummeted 8.5 percent compared to the US currency. Meanwhile, global currency exchange yesterday have begun to bet whether the euro will be worth 0.9 US dollars before 2016.
The IMF earlier this year estimated that the global economy in 2015 will grow more slowly than the Bretton Woods institutions predicted last fall (3.5 percent instead of 3.8 percent). The exception, according to the IMF, is the US, which should register a growth of 3.6 percent instead of 3.1. IMF in the eurozone of tiny expected economic growth of 1.2 per cent (regardless of record drop in the price of oil) instead of the autumn forecasts of 1.3 percent.
In such existential gray, the ECB is publishing packages bond-buying public and private sector institutions and EU de facto devalued euro. The move to commercial banks are supposed to get rid of securities, and money to gain from their sale could to lend to new economic investment cycle. The problem is that commercial banks “could”, but in fact are not required to be “in a time of complex and strong cross-currents” (score IMF) cast on granting new loans.
Euro becomes the latest link in the global war on currencies, a move which, according to Alex Weber, a former governor of the Bundesbank, ECB only buys time politicians who do not have a plan of structural reforms to revive the economyinto the financial system of the euro area. Plan for dealing with “teeing times” have neither the politicians in many other parts of the world. Probably because of the central bank of India, Canada, Denmark, Switzerland, China … in recent weeks withdrew a series of drastic moves that surprised the stock market: whether it is in terms of lowering benchmark interest rate, the separation of parity with the euro, injecting large amounts of cash in order to ensure liquidity …
Now cheapened euro means, for example, that the German car exporters are becoming direct competition with Japanese and American vehicle manufacturers.
Sudden strengthen the dollar threatens the strong growth of the US economy and exports. Specifically, how American business to cope with the competition, which drastically lower value of its currency and its deflation exported to others?
In the meantime, investors, and ordinary people, tired recent turmoil in the global market paper currencies, these days are back again to gold.
Following the publication of Frankfurt, an ounce of gold is valued in euros price increased three percent, while the dollar and sterling jumped by about one percent. Gold will at times like this all just be more expensive, forecasting traders in the City of London.