Fed’s Wake-Up Call Gives the Euro a Dose of Reality

Currencies / Euro
Aug 14, 2010 - 12:32 PM
By: Bryan_Rich

The Fed surprised many people this week when it announced it would respond to the deteriorating economy with more efforts to stimulate.

It was a splash of cold water on the face of the world, a wake-up call that hammered home the reality of the economic climate: The recession wasn’t normal, the recovery wasn’t real, and we’re only half way through what will likely be described as a global depression.

The recent deterioration in global economic data, led by the U.S., is clearly showing that the massive government policy responses that gave a mirage of recovery on paper didn’t do a thing for the real economy. The real economy wasn’t able to pull itself up by the boot-straps and pick up where the government stimuli dropped off.

No longer are investors holding onto the dream of a normal recovery, much less a sharp recovery.

I’ve been warning about this reality throughout the crisis, even as Wall Street was assuring investors that a return to normalcy was underway.

The evidence is, and has been, clear: The world is littered with unsustainable debt. And global de-leveraging is still in the early stages.

Moreover, the global trade imbalances that contributed to the crisis, and prohibit the global economy’s return to a sustainable path of growth, still reign.

That’s why I’ve stressed to my subscribers, the importance of the “big-pictureâ€