The SMP is dead, it failed...

ftalphaville.ft.com/blog/2011/04 … -memoriam/

Meanwhile, the Euro is strengthening, £0.886 and $1.46. The American and British central banks might be printing money now - but the market doesn’t seem to be pricing in the risk of default in the Eurozone, leading to a vast monetization on sovereign debt.

Euro strength is inevitable as confidence in the Dollar erodes. If you’re a foreign central bank trying to diversify your reserves out of vast amounts of dollars what else can you buy? You can buy some gold sure, but not a whole lot, what else? The Euro is being elected as a “Second Reserve” simply by default of no alternative. I know plenty of traders who have sold EUR from 1.38, 1.40, 1.42 … they’re all hurting badly now. The only thing the big buyers care about is Spain, if Spain looks like it will be ok then they will buy the EUR up to all time highs, and Spains debt/gdp is only(!) around 60% so there’s plenty of leeway to play with.

I see this as a passign of the buck; the Euro strength is engineered.

Someone has to pay the debts.

Yeah, seems to be a case of dodge the Chinese and US bullets in 2011 = Strong € by implication.

The ultimate irony is that the Bondholder will be burnt…ie the ECB itself on this particular book which amounts to around 8 to 10% of their asset base ( from memory). Their repo window in Ireland is even larger.

Then again the Chinese are acquiring that much in T-Bills every quarter as they finance the tat junkies spending habits.

The difference between the United States and Europe is that the US has already monetized a large portion of their bad debts. Europe, on the other hand, are still trying to extend theirs. I think the Euro strength is a fallacy, it will be exposed sooner than people think.

Large currency holders, such as foreign central banks, would much rather you “extend” than “monetize”. Your summary is exactly why the Euro has strengthened vs the Greenback.

I thought David McW had told us that as 2011 developed we would see the gradual destruction of the euro. Well we’re nearly in May and still no sign of this flight over the border into Switzerland having much impact.

Then there was the one where a regional government with a population the size of Greater Hamburg went bankrupt, and it brought the whole shooting match crashing down…

Ah well you can’t win 'em all.

The night is young…

David McW is not a trader.
And if he was he would be broke.

The bond market disagrees with you - bloomberg.com/apps/quote?ticker=GIGB10YR:IND