Euro vs. the Dollar
I am one of the contributors to a new financial newsletter out of Ireland. My topic this month was to predict the relative fortunes of the dollar vs. euro. I said I thought that by 3Q the dollar would fall at least to $1.50 / euro and probably more. I’m going to ask the editor if back issues will be posted online, but I think it’s OK to give this excerpt:
In contrast to the reckless Federal Reserve, the European Central Bank is behaving much more responsibly. The ECB is definitely adopting an “easy” policy to stimulate the economy, but its actions are within the bounds of reason: The annualized three-month growth rate in bank capital and reserves is running around 25 percent. (In contrast, U.S. bank reserves with the Fed in the last three months have grown at an annualized rate of over 400,000 percent–that is not a typographical error.)
Incidentally, even though I’ve quadruple-checked it, that number still seems impossible. But U.S. bank reserves were some $100 billion in September, and then were some $800 billion in December. So that means over the course of three months, they increased by a factor of 8. So that means over a year, they would grow by a factor of 8x8x8x8 = 4096, which is 409,600%, and then you subtract 100% to make it a growth figure.
Am I doing that right? Did bank reserves grow at more than a 400,000% annualized rate in the last three months of 2008?
