Thursday, August 22, 2013

Higher rates on the way

Emerging market rout threatens wider global economy

Hints of Fed unwinding of QE are unleashing a financial tsunami , starting off in emerging markets. We could finally be seeing a route tomraising of IRs.

Posted by voiceofreason @ 10:25 PM (4053 views)
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16 thoughts on “Higher rates on the way

  • Bond apocalypse (lit: uncovering). As a sideshow, Le Figaro suggests US and Israeli troops already in Syria. Oh, and India is also looking for a buyer for 200t of Gold it bought recently but hasn’t taken delivery of.

    Plenty of global panic ahead. Always handy if you know which way the US is going to jump. That puts JP Morgan and the Vampire Squid in an excellent position to front run the trading.

    Just in case, you hire a few paid stooges in the NSA to tip you off about what the other banks and traders are doing.

    Easy Peasy – Can’t lose!

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  • Umm, surely they’ve got this the wrong way round? The slightest hint that QE may be ending sends the world markets into a panic; therefore we mustn’t stop doing QE. Raising rates would only wreak further havoc.

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  • stillthinking says:

    So the dollar as reserve currency is in a way similar to the mismatched interest rates of the Eurozone except for the whole world, and to avert disastrous inappropriate rate levels the emerging economies have been saving, flooding the developed economies with low rate savings, and now this is unwound with tapering.

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  • ………BUT, BUT, BUT, wasn’t all tsunami of dollars supposed to help the people of the good ol’ US of A stay in their homes and put America back on a steady economic growth curve????…………ofcourse not, but none seems to be questioning where the money from the FED has gone or why, or what the consequences are?? …bit like a wonderful programme I saw about the miss-appropriation of about $40 Billion sent to Iraq to help re-build the countries infrastructure.

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  • ………BUT, BUT, BUT, wasn’t all tsunami of dollars supposed to help the people of the good ol’ US of A stay in their homes and put America back on a steady economic growth curve????.

    Well, it did for a while, and the wonderful peoples of the world were happy to hold lovely US greenbacks……but now they don’t want them any longer, and the greenbacks are all returning home…..

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  • Umm, surely they’ve got this the wrong way round? The slightest hint that QE may be ending sends the world markets into a panic; therefore we mustn’t stop doing QE. Raising rates would only wreak further havoc.

    QE was only supposed to be a temporary measure, the FED probably want’s to do the right thing…the question is how tough are they prepared to be about it?

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  • AEP says “The effect of the reserve build-up by China and others was to compress global bond yields, leading to property bubbles and equity booms in the West. The reversal of this process could be painful.”

    Indeed.

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  • @hpwatcher – Sounds like the tide is coming back in, just like throwing water up hill.

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  • So there emerging markets sell their bonds in exchange for $$$.

    Isn’t this very deflationary for the US as much of their money supply will be taken by the bondholders. You could say that it is hyperdeflationary as the demand for $$$ will be extremely high.

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  • Isn’t this very deflationary for the US as much of their money supply will be taken by the bondholders. You could say that it is hyperdeflationary as the demand for $$$ will be extremely high.

    I think the money will be exchanged for goods, and quickly return to the US. But we shall see….

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  • Ha, but they are not necessarily importing from the UK – They may be importing oil for Russia and cheap plastic crap from China all using USD.

    I suppose in theory eventually a large proportion of the money will flow back to the US. Sounds to me like now is an opportune time for another country to back their currency with gold and promote it as a stable alternative..

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  • (should read, importing from the us)

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  • stillthinking – spot on, but it’s worth emphasising that the savings to which you refer are largely a dependent variable. Fed QE leads to outflow of USD from US to buy foreign goods and assets that yield >1%. To prevent their currencies from rising (or to stabilise them) China, Japan etc. ‘saved’ these ‘excess dollars’ (dollars spent by the US military, consumers and investors in excess of US earning power) as USTs. So these are not savings in Yuan, Yen etc. made by the man in the street (as Greenspan used to imply). These countries have been increasing their dollar reserves – ‘saving’ – by the amount of surplus ‘free credit’ dollars that the U.S. payments deficit has been pumping out. It never was a situation that could last.

    There’ll be many panics before the dollar is supplanted (as it must be, barring a military ‘solution’) as reserve currency for anchoring other currencies, international transactions, pricing commodities, central bank reserves etc.

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  • Good interview. I do think there will be some kind of financial crisis in October, or early next year.

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