Diamond News Archives
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It’s less a question of if there will be a crisis sparked by the Fed’s rate raise regime than what that crisis will be. History has shown that it’s very difficult to predict the details, but not to the event in general.
Corporate bad apples who were able to hang around by borrowing zero-interest loans to pay their previous loans will start to fall. The fragility of the more debt-laden corporate balance sheets, loaded to the hilt with ZIRP debt, will be made ever more evident with each successive rate hike.
Whenever the Federal Reserve embarks on a round of rate increases, it’s a lot like shaking an overripe fruit tree.
That’s the analogy offered by Deutsche Bank macro strategist Alan Ruskin in a note late Wednesday, in which he urged clients not to “overcomplicate” the macro picture.
“A starting point should be that every Fed tightening cycle creates a meaningful crisis somewhere, often external but usually with some domestic (U.S.) fallout,” he wrote.
“In current circumstances, this good U.S. asset news is actually bad news for select (overripe) assets abroad because it emboldens and frees the hand of the Fed to shake the tree more,” he said. “In this regard, U.S. dollar strength is finally tightening financial conditions in the U.S. a little, and is a necessary (but as yet not nearly sufficient) condition to slow the Fed down.”
When shaking a tree, it’s usually not obvious what will fall out, Ruskin said, “but that there is ‘fall out’ should be no surprise.”
ORIGINAL SOURCE: Why negative interest rates are inevitable…[1] by Tom Lewis at The Gold Telegraph[2] on 5/12/18...
References
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“In this presentation made in Vancouver, Jeff explains why he believes gold and silver will be the next big financial bubble”
"In this presentation, Jeff Clark details specific equity investments to his audience. Jeff's opinions are his own and do not reflect the opinion of GoldSilver or its owners. Jeff's advice is general in nature and should not be construed as financial advice; investors should always perform their own due diligence before making any investment."...
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The threat of trade protectionism is the biggest concern looming over a solid upswing in the global economy, IMF Managing Director Christine Lagarde said.
The “darkest cloud” on the economic horizon is the “determination of some to actually rock the system that has actually presided over the trade relationships that we have all undertaken and enjoyed to some extent over the last many decades,” said Lagarde. She was speaking on a panel with world leaders including Russian President Vladimir Putin, Japanese Prime Minister Shinzo Abe, French President Emmanuel Macron and China’s Vice President Wang Qishan in St. Petersburg, Russia, on Friday.
“The good news today is that the sun is shining on the global economy. We went through a decade of difficult time, and now, we have an economy that is doing well," Lagarde said.
Lagarde said her list of worries also include high levels of sovereign and corporate debt and tighter financial conditions in emerging markets from monetary tightening, particularly in the U.S.
The IMF chief has repeatedly warned against the risks of a global trade war amid aggressive steps by President Donald Trump to crack down on what he sees as the unfair trading practices of U.S. competitors. The Trump administration on Wednesday launched a probe to determine if imported cars imperil national security, a move that could lead to higher tariffs, and next week Commerce Secretary Wilbur Ross will be in Beijing for the next round of trade negotiations to ease tensions between the world’s two largest economies.
"It would be a great mistake to resort to protectionism and unilateralism. This would be a self-inflicted wound,” Lagarde said. “Nobody wins a trade war.”
The IMF projects the global economy will grow 3.9 percent this year and next, the fastest...
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The petro-yuan on its own may well become enough of a disruptor to unseat the USD as the ruling currency of global trade.
But it turns out it was only the first what may be many Chinese incursions into markets previously monopolized by the greenback.
It is no small matter that foreign governments around the world have had to concern themselves with constantly sourcing dollars simply to participate in global trade. Of the many baked-in advantages the USD has enjoyed over the years against other currencies, this has been one of the most impactful, and it can no longer be taken for granted.
When Hong Kong Exchanges and Clearing (HKEX) bought the London Metals exchange in 2012 all the speculation about the effects on gold trading. The primary reason for buying the LME was to obtain its warehouses and ensure a free flow of metals to points east.
What it also did was give them control over what type and kind of futures contracts could be traded on their exchanges. No longer would the west control this very important part of the precious and industrial metal supply chain.
Now we’re seeing the next evolution of the power of owning the exchange. After successfully launching a yuan-denominated gold futures contract last year, the LME is now preparing to issue a range of yuan-denominated metals futures.
ORIGINAL SOURCE: Petroyuan is Only the Beginning, Pop Goes the Metals Market[1] by Tom Luongo at Gold Goats n Guns[2] on 5/24/18...
References
- ^ Petroyuan is Only the Beginning, Pop Goes the Metals Market (tomluongo.me)
- ^ Gold Goats n Guns (tomluongo.me)
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