Commodity Trade Mantra

Posts Tagged ‘Economic Growth’

"Too Many Promises That Can't be Kept" - The Fed Can't Raise Rates: Paul Volcker

One can’t really blame the government for continuing its debt-funded spending spree – despite protests to the contrary – after all rates are so low, it would be irrational not to take advantage and add on more debt. However, it is here that the punchline from the Volcker op-ed kicks in, and explains why the Fed is stuck and will find it next to impossible to hike rates.

Exposing The Link Between Monetary Policy And Social Inequality

Our monetary policy direction has been prolonging the slowdown since 2008. The longer we wait, the worse the hit we will take. We are going from one bubble to another and are just postponing the inevitable. Under our current system, which has stripped the working class from their savings, they are exposed to greater risks than ever before.

The Inflation Horse Defies Central Bankers' Whippings - Why?

Every 3 days for the past 9 years, one of the world’s central bankers dresses up as a jockey. They mount the horse & flog it with the whip marked ‘lower interest rates’. The inflation horse is supposed to respond to these whippings by suddenly springing to life & galloping towards the furlong marked ‘2–3% inflation’. No one seems to have told these jockeys they’re flogging a dead horse.

Why We Need Oil Prices to Rise to $120 Per Barrel or More

When oil prices fall from $100 per barrel to $50, the incomes of a large share of people are adversely affected. This drop in income tends to radiate outward to the rest of the economy because each worker who is laid off is forced to purchase fewer discretionary items & is also less able to take on new debt, such as to buy a new car or house.

Negative Rates Confirm The Failure Of Globalization: Deutsche Bank

Negative interest rates may or may not be a thing of the past, but the confusion about their significance remains. Here is Deutsche Bank’s Dominic Konstam explaining how, among many other things including why Europe will need to “tax” cash before this final Keynesian experiment is finally over, negative rates are merely the logical failure of globalization.

What Savers Do Under Negative Rates - The "Perversely Negative" Impact Of Going Negative

The initial market reaction on negative rates has been to see it as an act of desperation by central banks to keep up the momentum of economic growth. The risk is that this negative sentiment will infect the real economy, serving to depress spending. If so, the danger is that NIRP will have an impact on economic growth that is not merely non-linear, but perversely negative.

Inflation - The Fed's Nightmare Scenario Is Becoming Reality

Higher inflation is not a dream come true. It is the Fed’s worst possible nightmare. It will expose the error of their 8-year stimulus experiment & the Fed’s impotence in restoring health to an economy that it has turned into a walking zombie addicted to cheap money. If inflation catches fire now, with growth close to zero, the Fed will be completely incapable of controlling it.

For Commodities Forecast: Follow This Sneaky Indicator

The purchasing managers’ index (PMI) forecasts future manufacturing conditions and activity by assessing forward-looking factors. When a PMI “cross-above” occurs—that is, when the monthly reading crosses above the three-month moving average—it has historically signalled a possible uptrend in crude oil, copper and other commodities.

Why "Supply & Demand" Doesn't Work For Oil Prices

The costs of producing oil continue to rise, as a result of diminishing returns, so this fall in oil prices is clearly a problem. Low oil prices make future production unprofitable; it also leads to an increasing number of debt defaults. It is also inevitable that the price of oil must stop rising at some point because of the adverse impact on spendable income of consumers.

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.

Why Devaluing the Yuan Won't Help China's Economy

The slowdown in China’s economy was set in motion when the yearly rate of growth of the money supply fell from 39.3% in Jan 2010 to 1.8% by Apr 2012. The effect of this massive decline in the growth momentum of money puts severe pressure on bubble activities. Any tampering with the currency rate of exchange can only make things much worse as far as allocation of scarce resources is concerned.

Everyone Is Probably Wrong About The US Dollar

Could the current US dollar rally last a bit longer? Absolutely. However, it is unlikely to move substantially higher without a reasonable correction first. From a contrarian standpoint, with everybody on the long side of the trade, it may be time to take the opposing view. The good news is that a weaker dollar will play favorably for the beaten down commodity driven sectors.

The Debt To GDP Ratio For The Entire World: 286%

Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007.

Despite Oversupply, Oil Rallies on Currency Moves

Domestic oil inventories still stand at near-record levels for this time of year in at least 80 years. Because oil remains in oversupply, the recent rally owes a lot to currency moves. We might be seeing a dollar reset, which should finally give oil, gold, copper & other important commodities – the much-needed breathing room.

Interest Rates and the Future of Gold

In my view, the U.S. economy remains anemic, additionally suffering from a strong dollar & proponents of the rosy scenario are likely to be disappointed. A reassessment of economic prospects & reassessment of Fed policy in the months ahead could be just the turn of events that will support a springtime recovery in the price of gold.

China Cuts Interest Rates - 21 Central Bank Easings In 2015 Till Now

The decision to cut benchmark interest rates again has been widely expected by the market. There was also some speculation that the deposit rate ceiling would be increased. The cut to the benchmark lending rate is also smaller than the last cut in November (40 bps). This may make some observers view the move as cautious.

Oil Slump Says ‘No’ to Recovery Story - Eric Sprott Was Right

Cheaper oil prices don’t just come ‘out of the blue.’ Other commodities used for raw materials, construction & economic growth, have been languishing too. Real median incomes remain stagnant since the Great Recession. These are all signs that the recovery we are seeing is mainly asset inflation brought on by cheap debt, not economic growth.

What's Next For Oil And Gold: Thoughts From Eric Sprott, Rick Rule & Marc Faber

Weak economies around the world offer weak demand for commodities and for capital. The effect is to keep interest rates extremely low and to push commodity prices down. We can therefore view the oil price as a symptom of poor global economic growth, which is a long-term problem & not just as a consequence of a slight oversupply.

Fed Admits There Is Persistent Over-Optimism About The US Economy

Real GDP growth forecasts have typically started high, but are revised down over time as incoming data continue to disappoint. Possible explanations for this pattern include missed warning signals about buildup of imbalances in the economy before the crisis. Persistent bias applies to growth forecasts & also of inflation & unemployment.

Citi Warns - Central Banks Grip On The World Economy Is Waning

Not only are central bank policies having a disappointing effect on business sentiment and investment; they are failing even to revive inflation expectations. Despite having growing doubts as to central banks’ ability to create durable economic growth, we remain convinced as to their ability to push up risky asset prices.

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