The Euro is an inherently unstable currency which has been stress-tested only once or twice. My judgment is that the Euro will inevitably and very suddenly come under pressure soon, due to the diverging fortunes of the fairly solid northern part of the Continent and the rather more frothy east and south (as well as Ireland).

On the other hand, the dollar must be at or near the bottom (watch for the US authorities to intervene as soon as equity and/ or bond prices start being affected by the slide of the dollar - which can't be very far away).

BTW the pressure on the Euro will also lead to pressure on all emerging market economies, even those that have somehow weathered the crisis so far. So it is probably time to underweight those currencies as well.

How can emerging market economies come under pressure, you may wonder, when their natural resource commodities are riding so high?

My view is that we now have a bubble in oil, gas, and most natural resource commodities - and this bubble won't last long either.

The problem is: where will the next bubble be created? Around the globe, we have printed excess money since at least immediately after 9/11 (not to mention the fashion for increasing astronomies of leverage!), and all this money must be placed SOMEwhere: wherever the money goes, we have and will have a bubble, because the money is now travelling purely to speculative destinations without regard to fundamentals.

Indeed the excess supply of money has itself become the most fundamental factor creating bubbles and destablisation worldwide.

The proposals from the FSF and the Basel Committee are merely tinkering around the edges of the real problems facing the global economy today: because these institutions refuse to face the simple fact of the oversupply of money.

Prabhu Guptara