Fiat Currencies get Flushed
By: Michael Pento
Sep 04, 2012
If the August Non-farm Payroll report produces a number of less than 100k jobs, the chances of QE III being announced on September 13th are close to 100%. However, if the number is north of 100k the odds drop, but are still about 80% on more Fed money printing.
The truth is that the worsening global economy is going to force the hands of both the Fed and ECB. For example, China’s exports to EU (17) dropped 16.2% in July, as sales to Italy plunged 26.6% from a year earlier. The stumbling world economy has sent prices for base metals like iron ore falling 33% since July, which is the lowest level since October 2009. And now the nucleus of Europe, Germany, is starting to split. German unemployment increased five straight months in August to reach 2.9 million. Factory orders fell 7.8% in June YOY as manufacturing output contracted further in August. Finally, EU (17) unemployment hit a Euro-era record 11.3% in July, as U.S. initial jobless claims and the unemployment rate have started to creep back up.
But listen up all you lovers of the Phillips Curve and inflation atheists; Spain’s unemployment rate has just reached another Euro-era high of 25.1% in July. However, inflation is headed straight up, rising from 1.8% in June, to 2.7% in August. But this is just the beginning of rising unemployment and inflation. Just wait until the ECB and Fed launch their attack on their currencies in September.