Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Financial Markets Tensions Rise as Global Policymakers Part Ways

Politics / Global Financial System Oct 15, 2010 - 07:29 AM GMT

By: Mike_Larson

Politics

Best Financial Markets Analysis ArticleThe tension out there is so thick you can cut it with a knife. I’m talking about the tension building between central bankers and policymakers in developed nations and their counterparts in so-called emerging market countries.

On the one hand, you have policymakers here, in Japan, and in England promising to print money until the cows come home. Their aim is to boost their faltering domestic economies and combat deflation.


But the money isn’t staying at home. It’s flowing outward to emerging markets all over the world. That’s helping wildly inflate assets, inflation, and currencies there, risking the emergence of new bubbles to replace the old ones. So foreign central bankers and policymakers are fighting mad, and starting to push back at the developed world.

How will this epic battle end? What are the causes and potential fallout of this global policy war? Let me weigh in now…

QE2 Coming, Consequences be Darned!

Federal Reserve Chairman Ben Bernanke and his fellow board members have all but promised to throw more free money from helicopters. That’s the only conclusion you can draw from the minutes of the Fed’s September 21 meeting.

Those minutes indicated the Fed would “consider it appropriate to take action soon” in order to generate inflation. I expect to hear about several hundred billions of dollars in fresh funny money printing at the conclusion of the Fed’s November 2-3 policy meeting. The Bank of Japan has already announced similar actions, and the Bank of England probably isn’t far behind.

The problem?

New money is leaving the U.S. as fast as it's printed.
New money is leaving the U.S. as fast as it’s printed.

All that free money isn’t doing a hill of beans good for the domestic economies those central banks are targeting! Initial jobless claims just jumped 13,000 to 462,000, while the trade deficit surged 8.8 percent to $46.3 billion in August.

This proves that free money and a weaker currency aren’t boosting jobs or improving the balance of trade. But they did manage to “accomplish” something: Drive inflation higher! Producer prices rose another 0.4 percent in September after a 0.4 percent rise in August.

Instead of helping the “real” economy, the cash is flooding OUT of the low-rate, low-return advanced economies and flooding IN to higher-rate, higher-return developed markets and hard assets.

Harvard University professor Niall Ferguson told CNBC a few days ago that:

“All that liquidity ends up not where it is supposed to be, which is magically creating jobs for American workers in Michigan. It doesn’t do that at all. It ends up pumping up commodity prices on the other side of the world, with lots of unforeseen consequences.”

The New York Times, for its part, warned that:

“Economic weakness and low interest rates in advanced economies are prompting an extraordinary flow of investment to healthier emerging markets, undermining their exports as their currencies appreciate and creating the risk of destabilizing asset bubbles.”

Richard Barley, writing in The Wall Street Journal, added:

“The prospect of more QE — when investors are already gobbling up 100-year bonds, record levels of junk debt and subordinated hybrid corporate issues — could create new distortions, adding to both the political and financial pressures in global markets … The snag is that policy makers in developed countries can undertake QE, but can’t control the end result.”

Foreign Officials Fighting Back and Losing … So Far

For a while, central bankers and policymakers in several foreign countries were willing to sit by and let things play out. But their frustration is growing by the day. They’re now trying all kinds of things to stem inflows into their bonds, stocks, and currencies …

  • Brazil recently doubled a “financial operations tax” on foreign inflows into its bond market to 4 percent from 2 percent.
  • Thailand just axed a 15 percent income tax exemption for foreign owners of Thai bonds, effectively making it more expensive to own Thai securities.
  • And South Korea just announced it will more closely “inspect” foreign currency activities at leading banks, a back-handed way of trying to stem gains in the value of its currency, the won.
On October 5, Brazil doubled the tax on fixed-income inflows to slow the real's appreciation.
On October 5, Brazil doubled the tax on fixed-income inflows to slow the real’s appreciation.

All throughout this period, Asian central banks have also repeatedly intervened in the market to try to prop up the greenback against their currencies. A firm called IFR Markets estimates that in late September and early October, regional central banks sold their own currencies and bought almost $29 billion worth of dollars.

But so far it hasn’t helped. The Korean won, Thai baht, Malaysian ringgit, and other regional currencies have risen anyway! So too have their bond, stock, and real estate prices — to say nothing of broad-based inflation.

This is an inherently unstable state of affairs. You can’t continue to have the Fed print like mad, and foreign and hard assets skyrocket in value forever, without destabilizing the entire global financial system. Something has to give, and any number of dire consequences — a dollar collapse, a surge in inflation and interest rates, a massive collapse in overvalued asset prices — could result.

My take?

Profit from the moves we’re seeing in the capital markets if you’re nimble and an active trader. But keep an eye on the exits. Take profits along the way. And be wary for out-of-the-blue reversals, because global economic tensions are building fast.

Until next time,

Mike

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules