The mid term elections in the USA as well as the subsequent FOMC which will focus on QE2 has several severe ramifications to the world economy. Assuming no particular upsets, the Republicans should be able to win more seats. I feel that not enough for any actions with bipartisan consensus. The elections will bring about more confidence however, given that the voters feel that they had voted in more Republicans who are rooting for changes in what they perceived to be inefficient moves by Obama with regards to the economy. This euphoria should bring the Dollar up against major currencies for a short period. QE2 will depress the atmosphere. A more severe devaluation of the dollar will ensues. Aussie and Loonie are already above parity. Euro is back at 1.4 and stronger. The main problem will be the USD/JPY pair. This may even go sub 80s as investors flock to the Yen for a safe haven. The fact that BOJ pushed its meeting right after FOMC meetings are telling us a lot of this concerns. The Japanese Yen even now at less than 81 are decade lows. The Japanese is using extreme constraints not to take action at the moment but to evaluate the final outcome of QE2 before taking actions. I do believe it will entailed market intervention for the Yen to go forth towards the 85 range. Such actions will not be long term but is the best the Japanese can do to buy them. But God knows what happen after that.