“The most likely is scenario 2 where Trichet hikes by 25 and then signals that additional rate hikes could come”

You then go on to say,

Under Scenario 1

“This is the most probable scenario”.

So which is it! Both mutually exclusive scenarios cannot be correct. How can you possibly get it wrong when you statements appear to cover both eventualities?

Thanks for letting us post on your interesting and informative blog, but please be more carfeful in how you write. The above contradiction is within a few lines, not in a huge document. As it, your commnets make it about as clear as mud as to your beleifs.

Always appreciate your commentary.

I am not an expert and probably don’t know sxxx, but what the heck i am willing to take a wild guess:

We live in a time when oil prices have rocket upwards to almost $150. The federal reserve is unwilling /unable to support the nations currency. Inflation in most EMs is at double digit levels and forces aggressive rate hikes (see India and China ….) which eventually will choke of growth. (China’s CSI 300 Index of stocks has fallen 44 percent this year after gaining more than 160 percent in 2007) We are in the beginning phases of a reversal of global balance of payment disparities which have been the financiers of western economies and their account deficit (emphasis U.S.) in the last decade. This reversal has the potential to plunge world growth into recession, which could be deep and devastating given the mountain of bad debt and NPLs that can be expected. The first depression in the 21st century is only a heartbeat away.