Greece Turns the Euro into a “Carry Trade” Currency

By Gary Dorsch, GoldSeek

Last year’s parabolic rallies in copper, gold, Brazilian and Russian stocks, and the Australian dollar, are running out of steam. Suddenly, there are eerie reminiscences of scarier days gone-by. Volatility has returned to the money markets, amid worries about a possible “double-dip” recession for the world economy, capital flight from European sovereign debt markets, monetary tightening in Australia, China, and India, and the President Obama’s backing for the “Volcker rule,” – which calls for a clamp-down on the speculative trading binges of the Wall Street Oligarchs.

As fate would have it, on February 6^th, many of the world’s top central bankers were huddling in Sydney, Australia, for two-days of secret talks. European Central Bank chief Jean-Claude Trichet, New York Fed chief William Dudley, the governor of the People’s Bank of China, Zhou Xiaochuan, and the Bank of New Zealand’s Alan Bollard were all in attendance, while global commodity and stock markets were skidding lower, in their first significant correction since last June.

Spooked by fears that Greece or Dubai World would default on their debt repayments, Australia’s ASX-200 Index fell below the 4,500-level, losing 10%, of its value in three-weeks, due to rapid unwinding of Aussie /yen carry trades. There were equally sharp downdrafts on Wall Street, the Nikkei-225 Index in Tokyo, and the Hang Seng index crashed below the psychological 20,000-mark. Sovereign debt fears hammered the Australian dollar to 78-yen from above 85-yen a few weeks earlier. It began to feel like 2007-08 all over again.

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