Is the Euro depreciation planned or just a by-product of currency revulsion? No one knows. However, the events of the past week following the European shock and awe package are curious to say the least.
Here’s one curiosity. In the comments of my post on competitive currency devaluations, I said:
Obama’s role in the Euro crisis, especially in Spain is peculiar. I know most Americans like to think of the US President as the leader of the free world but his intervention in Spain’s domestic policy agenda suggests he knows something that you and I don’t know. I keep pointing the finger at AIG as an insurer or seller of CDS but there could be other explanations. [Is AIG the main CDS insurer for Greek government debt?]
In any event, the concept that the US President would call up another government leader and ask him to make budget cuts for the good of the world is something that will require an explanation down the line. And the Spanish media are positioning it that way too. The interesting bit is that Zapatero delivered – immediately. Very odd… and very worrisome, if you asked me.
The hilarious reply came from Olivier as to how an Obama-Zapatero conversation might have gone:
I might be wrong, but here’s the dialog I picture in my head:
O: Holà Zap, what’s up?
Z: ¿Hi O, yo wassap? (wondering why the honor all of a sudden, basking in the light for a sec)
O: listen Z, you gotta do something about that Euro shit before it goes out of control.
Z: … ¿I thought we just did, what with the EU/IMF shit and all?
O: well, that’s not going to fly with my Senate if you guys don’t seriously go through the motions, what with the massive US contribution to IMF… Also I have mid-terms coming up, I have to show who’s the man here. Hold people accountable, blah blah blah
Z: I see. ¡But my hands are tied, what with I’m a socialist, trade unions and shit you know!
O: I’m not asking, I’m telling.
Z: … ¿Can I at least leak that you called me so it looks like my hands are tied and it’s serious and shit?
O: Sure, you do that.
O: Well, it’s been nice to catch up, we should do this more often. Say hello to the wife and both kids, hmmkay?
Z: OK, later. I think I’ll leak some shit about Sarko too. Maybe tomorrow.
Here’s that leak about French President Sarkozy allegedly threatening to leave the Eurozone (in Spanish):
Zapatero: "Sarkozy amenazó con salirse del euro" · ELPAÍS.com [Update: The Guardian has the same story in English while Le Figaro, a French daily denies the claims.]
Funny thing is the Chinese may not like a Euro maxi devaluation strategy as they are hitched to the wrong currency. Commenter Abhishek explains:
Another side effect of this Euro going down is that China may even devalue its currency against the dollar.The paper thin margins for the Europe export dependent companies would be wiped out leading to a domino effect. For example look at Suntech, world’s 2nd largest solar company.
Interesting times.