Bond yields in Europe continue to collapse. This comes amidst a massive QE program that the European Union began last Monday, in which they began repurchasing sovereign bonds in an attempt to boost inflation throughout the EU and to foster growth.
Inflation will undoubtedly occur, as the amount of money created in the process of repurchasing these 1.1 trillion euro worth of bonds is already being felt across the EU.
As bond yields have collapsed, so too has the Euro. Year to date, the Euro is down a whopping 12 percent versus the US dollar, rapidly approaching the ever important parity mark.
Not only is the Euro down versus the US dollar, but it is also down against a broad basket of other currencies, notably, the Yen and the Sterling, reaching an 18 month low vs the Yen, and a seven-year low against the Sterling.
Ironically, the EU is stating that they are doing this in the name of growth. Don’t worry about the fact that this growth comes along with reduced purchasing power, as businesses that import products into the country now must pay a higher price tag, for the same products they purchased last year.
Given the huge dependency that businesses now have on ”just in time” inventory, the effects of this currency drop is already being felt. The trickle-down effect is less profits for business, which affects all aspects of the broad economy, including higher prices.
To highlight exactly how bad the plummet in the Euro has been, it has been estimated that the Euro is on track for its worst quarter in history, hitting a low of $ 1.056 on Wednesday.
Making matters worse, is the viewpoint that broad markets have recently adopted, in which they see the FED possibly raising rates by mid 2015. This comes on the heels of a better than expected US jobs data report.
Despite what the bureaucrats in Brussels would have their citizens believe, a falling currency is not good for anyone that bases their hard earned savings and wealth in that currency. It makes everyday goods more expensive and the standard of living drop.
Of course, the government cares little, if at all, about the plight of the man on the street, as they are more worried about inflating away government debt and reducing the true value of what they owe their creditors.
One true protection in this scenario is precious metals, yet this seems to get no mention by politicians and the mainstream media. No surprise there, given the complete disdain these parties have towards honest money.
Will the EU reach parity, or will another country make its move? Time will tell, as this is an ongoing war that is not fought in broad daylight, but rather behind the scenes. The currency wars rage on.