Commodity Trade Mantra

All posts under ‘Emerging Markets’

Emerging Market Meltdown May Plunge Global Economy Into Recession

When the Fed effectively telegraphed its new reaction function last month, the FOMC served notice to the world that it was not only acutely aware of what’s going on in emerging markets, but also extremely worried about the possibility that hiking rates could end up triggering something far worse than the “tantrum” that unfolded across EM in 2013.

Will the Fed Have to Save Emerging Markets with QE4?

As emerging markets and nations attempting to defend their currency pegs to the USD sell U.S. Treasury bonds (which have been held as foreign exchange reserves), the yields on the Treasuries rise as a matter of supply and demand. As supply increases, sellers must offer higher yields to entice buyers. This dynamic undermines both the emerging markets and the U.S.

BRICS Bank Officially Launches As Sun Sets On US Hegemony

On Tuesday, ahead of this year’s summit in Ulfa, the BRICS countries officially launched the new bank along with the reserve currency pool. Brazil, Russia, India, China and South Africa (BRICS) will also look to begin settling more trade in national currencies. The Chinese yuan as the leading currency can be used in settlements among BRICS member states.

Gold, the SDR and BRICS

There are difficulties when it comes to including gold in the SDR basket as none of its paper constituents are convertible into gold. It also cannot last long as major central banks insist on printing money as an economic cure-all. But China’s position with respect to gold & her own currency could be a different matter.

The Biggest Economic Story Going Into 2015 Is Not Oil, But Emerging Markets

Emerging markets today are half the world economy. Much of what happened in global credit markets, especially in emerging markets, was based on cheap, easily available dollars, which has ended. It used to be said that when the US economy sneezes the rest of the world catches a cold. Now it seems all we need is a hiccup in emerging markets.

First BRICS Bank, Now BRICS Food Bank

In retaliation to Western sanctions, Putin yesterday unveiled a total food import ban from all sanctioning nations & just as the BRICS created their own ‘IMF-lite’ away from Washington’s prying eyes, Russia plans to substitute banned goods with not just domestic supplies but imports from Latin America, China & several other nations.

Why Did the BRICS Back Russia on Crimea?

The BRICS’s support for Russia shows the Western-dominated post-Cold War order is eroding. It’s worth noting that the BRICS countries are supporting Russia at potentially great cost to themselves, given that they all face at least one potential secessionist movement within their own territories.

Fiat Money and Business Cycles in Emerging Markets

The role money plays in international trade is not different, nor is it less a medium of exchange in foreign trade than it is in domestic trade. A surplus of money flows into a country only when its residents are more eager to increase their cash holdings than are the foreigners.

Emerging Markets Banking Crises Are Next

The concern for emerging markets is that carry trades and subsequent inflows of capital have created substantial credit and real estate bubbles in many of these markets. The unwinding of these bubbles is likely to lead to banking crises in several countries, including China.

Why Some Emerging Markets Are Heading for a Economic Bust

A tighter monetary stance undermines the rate of growth of money supply and thus weakens support for various bubble activities. This sets an economic bust in motion. The main reason for the tighter stance was a sharp decline in exchange rate of domestic currencies against the US dollar.

European Banks have $3 Trillion of Exposure to Emerging Markets

European banks have loaned in excess of $3 trillion to emerging markets, more than four times U.S. lenders, putting them at greater risk if financial market turmoil in countries such as Turkey, Brazil, India & South Africa intensifies. Europe’s banks have about 12% of their assets in emerging markets.

Emerging Markets, Interest Rates and Tapering

Having added unprecedented amounts of liquidity into its own economy through QE, the Fed is now reducing the pace of its expansion of narrow money. This is bad news for emerging market countries, who will surely conclude that international monetary co-operation has broken down.

Gold Price Exploding In Emerging Markets

The reason for the emerging market turmoil is the capital flight out of those markets, directly linked to the tapering fear from the US Federal Reserve. Gold is the ultimate protection against the central banking illusion which is why we advocate holding physical gold outside the banking system.

Is The Emerging Market Growth Story Over?

There are a large emerging economies that are slowing which raises the question as to whether the emerging market growth story is over, with investors pulling at least some of their money out from these countries.

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