Being huge, consequential and technologically advanced, China isn’t normally lumped into the “emerging” category with Brazil and Argentina. To most observers they’ve already left the kids table and are now seated with the developed-world adults. But that might be premature. A big part of China’s economic ascendance was purchased with borrowed money – including a […]
A Spiking Dollar = Emerging Market Chaos
The dollar collapse thesis – which ends with all fiat currencies achieving their intrinsic value of zero — doesn’t preclude some thrills and chills along the way, in which some currencies fall faster than others and wreak havoc on various parts of the global economy. This might be one of those times, as instability in […]
Russia Deploys Exotic New Weapon: A “Budget Surplus”
The price of oil is rising, which is obviously good news for those who sell it to the rest of us. Russia in particular seems to be enjoying the current trend, so much so that — if I’m understanding this correctly – Moscow is now receiving more in taxes than it’s spending. This is producing […]
Gold Versus Bitcoin: The Pro-Gold Argument Takes Shape
Sound money advocates who love the concept of cryptocurrencies but don’t want to abandon precious metals have been trying to clarify their thoughts of late. Risk Hedge just helped, with a comprehensive statement of the pro-gold position. The following is an excerpt. Read the full article here. All the Reasons Cryptocurrencies Will Never Replace Gold […]
Welcome To The Currency War, Part 23: Europe Will Devalue Or Dissolve
No rest for the wicked. With the shockwaves from Brexit and President Trump still reverberating around the world, the established order is bracing for more bad news. Next up is a December 4 Italian constitutional referendum that might end the reign of centrist prime minister Matteo Renzi and replace him with a bunch of anti-euro […]
How Stupid Do You Have To Be To Let This Happen?
Europe is the birthplace of Western civilization and the source of most of the trends and bodies of knowledge that define modernity. The average European speaks several languages versus sometimes less than one for Americans. They are, in short, a well-schooled people with vast accumulated wisdom. So how do we explain this: After World War […]
Welcome To The Currency War, Part 22: China Devaluation Watch
Not so long ago, a big Chinese currency devaluation seemed both inevitable and imminent. The story went like this: China had borrowed tens of trillions of dollars in response to the Great Recession and squandered much of it on uncompetitive factories and ghost cities. The companies and governments that own these worthless assets were about […]
Atlanta Fed Sees Far Weaker Than Expected Q1 GDP
Another Monday, another set of “surprisingly” bad economic numbers. A few representative headlines: China manufacturing prices decline for 18th straight month Oil prices fall 5% on bad China data, OPEC uncertainty Global factories parched for demand, need stimulus Junk bonds suffer a rare negative return in January US consumer spending softens, savings hit 3-year high […]
Welcome To The Currency War, Part 21: Japan Goes Negative; US To Return Fire In 2016
Well that didn’t take long. Two weeks of falling share prices and the European and Japanese central banks caved. First the ECB promised new stimulus — which the markets liked — and then the BoJ upped the ante with negative interest rates — which the markets loved. Here’s a quick summary from Bloomberg: Central Banks […]
Paris Attacks = President Marine Le Pen AND Massive Euro Devaluation
Earlier today, articles started appearing about the rise of France’s right wing, anti-immigration National Front party in recent polls. This wasn’t a surprise given the ascendancy of formerly fringe political movements in most European states. See, for instance, Portugal Is Potentially A Very Big Deal. Still, that a formerly (and not so long ago) neo-Nazi […]
Even Small, Well-Run Countries Can’t Escape The Currency War
The old saying “When elephants fight, the grass gets trampled” captures perfectly the dilemma of the world’s non-superpowers. From Brazil to Thailand to non-eurozone Europe, the currency war raging between the leading economies is creating collateral damage. Here’s Bloomberg on the war’s European theater: Europe’s Quiet Currency War Besets Nations Losing Inflation Grip From Stockholm, […]
Bye Bye Brazil
For about a decade there, Brazil was the Latin American country that got it right. Under a socialist but apparently reasonable government they kept their budgets under control, managed the population shift from farm to city, and developed some efficient export industries that brought in plenty of hard currency. The Brazilian real held its own […]
Can You Imagine The Fed Raising Rates In This World? Currency Crisis Edition
A month ago China’s stock bubble was bursting and Greece was imploding. Yet the US Fed, in a violation of both headline sentiment and common sense, was still promising to raise interest rates come September. Fast forward to this week. China’s surprise currency devaluation has sent the global markets into a tailspin, but rather than […]
China About To Make History — Again
Any discussion of China has to open with the now-widely-understood fact that the numbers it reports are not to be trusted. Knowing this makes it easy to dismiss claims of high and consistently-on-target GDP growth, for instance, as a combination of government-directed borrowing and spending, and simple fabrication. But how to handle negative numbers? When […]
QE Fails In Japan: Inflation Nonexistent, Consumer Spending Drops, More Ease Coming
After nearly three decades of stagnation, Japan in 2013 went all-in, ordering its central bank, the Bank of Japan, to buy pretty much every bond on the market with newly-created yen. The BoJ’s balance sheet — a rough proxy for the amount of money it has created and dumped into the economy — soared at […]
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