The Euro Crisis and the new "normals" in forex trading

As Europe navigates through the current Euro crisis, Fair Trading Technology CEO Tim Haman reflects on the changing markets and how volatility is creating a new sense of what is "normal" in forex trading.

Just recently, we found out that the EU will write off Greece’s debt by 50%. Another 100 billion EUR bites the dust. But since that money was created out of thin air anyway, it can disappear just as easily.

One million Euro is a lot of money for most people. One billion—or one hundred billion—is enormous, especially since the Greek economy represents about 2% of the total EU economy. In that perspective, it is mind blowing how that can affect the world as it does.

Stock markets goes ballistic, volatility in gold and silver increases, and everyone seems a bit happier when the news broke. Why one may ask.

Did it solve Greece's financial problems ? No. Not even close. The problem is much tougher than that, and we will soon see how the world's banks and governments are going to respond to this.

It has never been about Greece. I will let you into a secret here: ask how healthy the other countries around Europe are. Italy, Spain, Ireland, Portugal, which have all been discussed, but there are more. Also ask about France and Germany, and even England. They account for far more than 2% of the European economy, possibly as much as 70% or so. 

Khadaffi was three times as rich as the richest guy on the planet. Wonder again why USA and the EU went after him? Sorry for my sarcasm here, but war is always about the money. He was a dictator, so I am not defending him, but the 200 billion USD he had was probably one of the targets and driving forces for the start of the war. Would that have been different if there was no financial crisis?

What effect does this have on the Forex markets?

The markets these days are very volatile and liquid, which is the new normal, compared to a few years ago. The swing in the EUR/USD the past months were extremes just a few years ago, but today, no one thinks that much if the master pair moves 200 pips.

Interest rates are another amusing example of the strange markets we now have, where it seems impossible to have healthy levels. It is almost impossible to understand a decision by the Swiss central bank that they will defend the CHF by buying unlimited amounts of EUR on the market. Why not just spell it out: “Let's start printing infinite amounts of CHF”. Everyone does just that, printing money like crazy. Japan and Switzerland are the two that at least spell it out, just a little bit at least. USA and the EU are doing their best to try to hide it.

And central banks are now buying gold again after about 15 years of net selling.

All this, summed up, leads to the question: will the Euro survive?

In this ongoing charade, it can never survive, at least in its current form. This won't happen tomorrow. It could well be 10 years before it crashes.

Have you ever thought of why the Euro was created in the first place?

What was the problem with the Deutsch mark, peseta, drachma or the French franc? The official story was that we needed a coin to compete for power over the almighty dollar. What if there really was a crisis we had never heard of back then? I am not saying there was, but changing all forms of money from one shape to another enables governments to set new rules, new interest levels, the amount of cash and the amount of digital money in the systems. Somewhat scary thoughts.

And they can do that at will, anytime. Change the currency for us. Bail out banks, or even crash banks.

The only thing that will stop currency trading is if there is only one “world” currency available. Maybe this is in the plans of the “powers-that-be”. Or maybe not. Who knows. I my opinion, gold might enter the scene again. It has never left, but it has been in the shadows for about 40 years now.

Let's trade, and let's see whats the next "normal" will be. Maybe a daily move of 1000 pips? Let the hunt begin...