Commodity Trade Mantra

Posts Tagged ‘Mario Draghi’

Eurozone in Danger on Falling Purchasing Power of Dollar, Not Rising Commodity Prices

All financial prices in the Eurozone are badly skewed. So far, the price inflation environment has been benign, but this year, things have been changing. Higher levels of debt will never allow the ECB to run interest rates up sufficiently to kill price inflation. More likely, positive rates of only one or two per cent would be enough to destabilise the Eurozone’s financial system.

The US Dollar Has Just Been Shanghaied By The G-20

The main meeting of the G-20 finance ministers and central bank governors was conducted with much publicity. A secret side meeting of a core group consisting of the US, Europe, Japan, China & IMF in Shanghai on Feb. 26, resulted in the biggest dollar take-down operation since the Plaza Accord of 1985 & will go down in history as a major turning point in the international monetary system.

Will this Manic Stock Market Rally End in Tears?

The stock market is back to where it should be, i.e. in rally mode. Can the stock market completely ignore these changes and keep powering higher on the fumes of Mario Draghi’s promises and another rate cut or three in China? At some point reality will trump fumes, and the manic rally will falter and the mania in stocks will end in tears.

ECB Will Cut Rates To Minus 3%: JP Morgan

ECB is now close to running out of ammunition. Contrary to its initial design, the OMT programme could no longer be seen as unlimited. Draghi is already playing down Q€’s potential, noting that QE alone will not be sufficient to reignite eurozone growth. It seems the only option for the ECB would be to plunge further into NIRP-dom.

When A Soaring Dollar "Reflects Loss Of Investor Confidence And Is Potentially Devastating"

A strong dollar has a Jekyll and Hyde personality – a ‘good dollar’ that reflects economic & monetary policy divergence & whose rally is orderly and limited. A ‘bad dollar’ which de-couples from monetary policy & reflects instead a loss of investor in the face of higher volatility. That dollar rises faster, much further & is potentially devastating.

How a Default by Greece May Sill Unravel the EU

Greece is actually in the driver’s seat. Historical evidence shows that once a country reaches such a situation it is likely to default within the next 2 years. Quotation: “If you owe the bank thousands, then you have a problem. If you owe the bank millions, then the bank has a problem.” In the current situation, it is the EU that has a problem.

QE Warfare Pushing World Financial System out of Control

William White, a former chief economist to the Bank for International Settlements said QE is a disguised form of competitive devaluation. “There is a significant risk that this is going to end badly. Central banks have been put in an invidious position, compelled to respond to a deep economic disorder that is beyond their power.”

Is Market Sentiment Shifting to Gold?

When you look at the world economy, there’s no shortage of worries. Most market strategists do not view gold as a currency but only as a commodity. The rule: dollar up, gold down. But on viewing gold as a currency compared to many other currencies, including euro, ruble, yen & rupee, it has been a good place to be in over the last year.

ECB Will Be Big Factor in 2015’s First Half

A widely hoped for positive decision at the January 22 ECB meeting could well have a result similar to stimulus announcements in the U.S., China, and Japan. However, another meeting ending with no action, only more of the familiar promises of action ‘if necessary’, could well be devastating as markets lose patience.

Same Currency War, New Battle Phase

What is a currency war? They happen when there’s not enough growth in the world to go around for all the debt obligations. In other words, when growth is too low relative to debt burdens. They do this basically by cutting interest rates or intervening in markets. It is as an effort to cheapen the currency, get inflation & to display growth.

Central Bank Credibility, The Equity Markets, And Gold

Coming out of the Great Recession, central bank credibility – their ability to “pull us out” of the Recession – was being severely questioned by investors. Thus, a good portion of investor money found its way into gold. That changed in 2011. Central bank credibility is at a peak, so gold is in the dumps.

Central Banks: When We Succeed, We Fail

Central banks around the world share a few simple goals. Should central banks succeed in jacking up inflation, devaluing the purchasing power of fiat currencies and pushing stocks to the moon, they will have failed their citizenry. Should they succeed in reaching their goals, they will trigger catastrophic instability.

Will Deflation, Recession Concerns make ECB Buy Gold Bullion?

Over the last couple of months, ECB has launched several measures to revive the lackluster Eurozone economy. Mersch said ECB should let these steps take effect first before considering more action. If more action was needed, ECB could theoretically purchase government bonds or other assets such as gold, shares, or ETFs.

3 Things Central Banks Will Do to “Save the Economy”

Central bank activism, stimulating credit creation with artificially low interest rates, only works when people see little risk of default or rising rates. But that risk cannot be ignored forever. Rising rates come around sooner or later; often ferociously. When that happens, central banks lose their ability to coax stocks higher with lower rates.

As the Eurozone Stalls, China Cuts the Red Tape

Compared to many Eurozone nations, China is relatively young. There’s huge growth potential in this region, especially now that Premier Li has resolved to cut red tape & balance monetary and fiscal policy. In 10 years’ time, the 35-to-45 cohort, a well-educated group with good salaries & credit, will expand dramatically.

Doubling Down on Inflation

The benefits of inflation are supposed to be compounded by rising stock & real estate prices, creating a wealth effect for the owners of those assets which subsequently trickles down to the rest of the economy. In other words, seed the economy with money & inflation & watch it grow. But why has growth yet been a no show?

QE Ending Because It Was Successful? Then Here Are A Few Questions

Certainly, QE-induced perpetually rising asset prices & sinking volatility, likely boosted consumer confidence through the interpretation of lofty prices as ‘all must be well’. However, those aspects dangerously conspire to produce a false perception about the true state of economic fundamentals. Some simple questions need answers.

The Bank Stress Tests That Could Stress Markets

Portugal’s problems reminded investors that Europe’s bank problems have not been fixed. The belief that the Euro has been saved is lulling investors into taking on too much risk, as they did in 2007. Whatever the outcome of the EU’s stress tests, it’s only a matter of time before the Eurozone debt crisis re-erupts.

Why Central Bank Stimulus Cannot Bring Economic Recovery

The Central banks of the world are engaged in a futile effort to stimulate economic recovery through an expansion of fiat money credit. Rather than stimulate the economy, central bank credit expansion causes capital destruction and a lower standard of living in the future than would have been the case otherwise.

Negative Interest Rate Policy Arrives In Europe

Negative interest rates would support banks but destroy the business model for money- market funds, which would face the prospect of paying to invest. But the ECB doesn’t set policy to keep alive certain parts of the financial sector. Policy makers want to show that they haven’t exhausted their options yet.

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