When I first posted about the Dollar Smile Theory in January 2008, there were no obvious signs of economic weakness in Europe. Sure a bank or two had stumbled, but the economic numbers stilled looked robust.

It was only because Europe was lagging, not because Europe had miraculously avoided the credit and real estate bubble that economic numbers held up for a while longer.

The EURO has been SMASHED down from $1.60 since.
Gold has been SMASHED down from $1000+ since.



European Retail Sales Drop by Record on Rising Costs (Update3): “European retail sales declined 1.6 percent in March, the most since at least 1995 and twice as much as economists forecast, as soaring fuel and food costs sapped consumer spending.

The drop in euro-area retail sales from the year-earlier month is the largest since the data series began more than a decade ago, the European Union's statistics office in Luxembourg said today. From the prior month, sales declined 0.4 percent. Economists had forecast a 0.7 percent annual decline and a gain of 0.2 percent from the previous month, according to Bloomberg News surveys.”

The Global Decoupling Theory is garbage. I’ve said that from the beginning and it has now become undeniable. However, the markets haven’t yet fully priced this in. While the Asia indices have corrected significantly, Latin American indices have not.

“Even unemployment at a record low has failed to spur spending. Confidence among households in France dropped to a record low last month, while a European Commission index of sentiment in the euro area also fell in April.

Retail sales in France declined 0.8 percent in March from the year-earlier month, while sales in Germany, Europe's biggest economy, dropped 1.1 percent, today's report showed.”

These economies too shall fall into a recession. They have to.



Of course none of this is immediate. For example, oil looks hell bent on one final speculative blowout.