August 18, 2011 – German GDP is Another Nail in the Coffin for the Global Economy


2) German GDP is Another Nail in the Coffin for the Global Economy. Major hedge fund strategists were stunned by German's Q2 GDP, which came in at a feeble seasonally adjusted 0.1%. This is a mere shadow of the more virile 1.5% growth seen in Q1. In one shot, economic growth has downshifted from a rapid 4.7% rate to a more American style 2.7%. Germany has been the engine that was driving the European economy. If it breaks down, all of a sudden Europe is going nowhere, and the world suffers.

This is the flip side to the European debt crisis. What did the Portuguese, Italians, Irish, Greeks, and Spaniards do with the money they earned off of all that German sovereign lending? They ran out and bought Mercedes, BMW's, and Volkswagens. Take away their credit cards, and all of a sudden the highly export dependent German economy takes it on the chin.

This is why German Prime Minister, Angela Merkel, is risking her political career attempting to salvage the European monetary system, even though it will be hugely expensive to do so, and is highly unpopular with the electorate. Efforts to fix the European model will be a recurring theme in the financial markets for many years to come.

How does the intrepid, opportunistic trader cash in on this? Trade the Euro (FXE) from the short side, or buy the short Euro ETF (EUO). The execution date of the continent's mindless high interest rate policy has just been moved up, and there will be no stay.



The German Economic Engine Isn't Looking So Good