Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Financial Markets Tensions Rise as Global Policymakers Part Ways

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

By: Mike_Larson


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,


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

© 2005-2019 - 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