Commodity Trade Mantra

Posts Tagged ‘Credit Contraction’

Equity Markets and the Credit Contraction

Macroeconomic policy is centred on ensuring that bank credit grows continually, so since the Lehman crisis any tendency for bank credit to contract has been offset by central banks creating money. The bald fact that equity markets have now lost upside momentum and appear to be at risk of a self-feeding collapse will be viewed by central bankers with increasing alarm.

Is Credit Deflation Bad For Gold Prices?

Its a common view in financial markets that credit deflation is bad for gold prices, as gold nowadays is regarded as an asset to be sold in the scramble for cash when people are forced to pay their debts. Distressed speculators will come under pressure to sell gold, but this argument ignores the certainty that during a credit deflation government-issued currencies always weaken against gold.

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