Sleight of Hand
Ian Reynolds
Investing and Trading | Capital Markets | Macroeconomics| Bitcoin & Decentralised Finance | Helping to Find the Money Flow | Commentator | Speaker
Don't let the war theatrics fool you, there is a global economic and cybersecurity war out there. Countries have learnt from the Ukraine / Russia war (now a war) that unless you go nuclear then it's really difficult to get an advantage. Easier to collapse economies / currencies. Especially when some countries seem to be doing it to themselves anyway.
Central Bank Intervention
40 years ago G5 leaders met in the Plaza Hotel in New York to sign an agreement by which the G5 nations (France, Germany, UK, Japan and the US would sell the $US? against the Yen and the Deutschmark to address the trade imbalances. $US depreciated 25% against these currencies over 2 years.
However it was the start of 40 years of sluggish growth and deflation for Japan.
At least there are some real leaders above.?
With the massive debt pile and a 2$UST budget deficit the last thing the US needs is a strong dollar. Equally other countries don't want a weak currency, a little weaker but not a lot weaker.
In fact a burgeoning $US is a wrecking ball for financial markets.
Markets always take the path of maximum pain.
Precious metals have been sniffing out macroeconomic danger
US Economy
Chair Powell walks back interest rate cuts
Is the FED losing credibility and does anyone care ?
?Central banks, not just the FED, have pretty much lost control of the narrative now. Vacillating between rates up / down / stable. It just doesn't matter any more what the short end of the curve does anyway. Central banks have no influence on long interest rate unless they're trying to manipulate them. And that always fails eventually.
"Inflation is transitory " !!
Resilient retail sales show the consumer can still get credit, maybe via BNPL schemes.
The stagnant housing market is beginning to have an effect on construction and the lumber chart, which was vertical upwards after COVID, is now falling out of bed.
US Fiscal Debt
The IMF warned this week again about the current debt path.
领英推荐
And also that some actors are now endangering market liquidity
There was a bright spot for bonds this week though
A low size auction, with the new Treasury mandate to buy back 20 year bonds in the background, gave the Treasury a much needed result.?
In The Background
China
?Japan
Tax
For once tax is in focus. Everyone's favourite topic.
For the last 20 years every G 7 / 8 / 20 meeting has discussed how tax revenues are falling behind against government spending. 20 years later and massive debt everywhere here come the tax hikes. Canada first, Canada being in the most desperate situation.
In the US fights broke out at tax offices as the public rushed to fill in their tax returns, expecting refunds in due course.
And at Atlanta [X]
Watch out for more of this?
Australia
What's Next
BoJ on Friday is key. Higher Japanese rates possible. Does that mean the "wall of money" that could flow back to Japan with higher rates will eventuate.
Given that the Yen keeps getting weaker and UST yields going higher, would indicate that the carry trade is getting even better !
This Week's Important Economic Indicators [London time]
?