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Great Unwinding of policymaker stimulus creates interest rate risk

Interest rate risk is rising in the developed economies as the Great Unwinding of policymaker stimulus continues.  Since the blog first highlighted this Unwinding last month: Oil prices have continued to tumble, with Brent now down over $15/bbl from its late-June peak The US$ has continued to rise from multi-year lows versus the yen, euro and pound And of course, […]

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“Disaster is still some way off” for Cyprus, as Germany prepares to vote

Back in April, the blog suggested that capital controls might remain for rather longer in Cyprus than the “few days or weeks” suggested by the central bank.  And a month later, the bank was still unrealistically claiming they would be lifted “as soon as possible”. Today, the blog’s own view that they could be in place “for […]

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Global interest rates surge as Newton’s 3rd Law continues to operate

Newton’s 3rd Law of Motion states, “To every action there is always an equal and opposite reaction“.  Thus the forces of two bodies on each other are always equal and are directed in opposite directions. Policymakers forgot this Law in their response to the 2008 financial Crisis.  Instead they believed that cutting short-term interest rates in the major economies to zero, […]

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“A word means just what I choose it to mean”

‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ This quotation from Lewis Carroll’s great novel ‘Through the Looking-Glass‘ rather seems to sum up policymakers’ current approach to financial markets. Two recent examples highlight the issue: • […]

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Eurozone politicians have built a Tower of Babel

Last week saw the 20th EU ‘Crisis Summit’. Like the previous 19, it achieved little. Yet everyone at the meeting knew what had to be agreed: • A banking union which operates across national borders • The issuing of joint Eurozone bonds, guaranteed by all euro members • Adoption of a Federal budget and economic […]

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The Eurozone train crash heads for the buffers

For 25 years, Western policymakers coasted to electoral success on the back of an economic Supercycle. The BabyBoomers’ arrival in the Wealth Creator 25 – 54 age group meant there was just 16 months of recession between 1982-2007. Politics and policy thus hugged the middle ground. Political debate became based on focus groups, rather than […]

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Leaving the Eurozone would be very difficult

Last December, the blog raised the question of how a country like Greece could actually leave the Eurozone. Many people believe this is inevitable. But how would the practical issues be solved? Now Wolfgang Münchau has taken up the challenge in the Financial Times. His research suggests there are only two possible exit routes: • […]

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Leaving the Eurozone creates practical problem

There is much discussion of countries such as Greece being likely to leave the Eurozone. Some even believe it is inevitable. But on a practical basis, how would it happen? This is a question that has been bothering the blog for some months. But with another crisis summit meeting about to start, it is no […]

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Q3 results show companies cautious over the outlook

6 months ago, when reporting Q1 results, the blog strongly disagreed with the rosy outlook being offered by most analysts. It warned then that: “The history of the past 40 years shows high oil prices have always led to: • An initial boom in volumes/margin as buyers rush to secure supplies • Then a period […]

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“This is far worse than the banking crisis of 2008″

Long-standing readers will remember that then-UK Finance Minister Alastair Darling was the first Western politician to recognise in August 2008 the disaster that was about to hit financial markets. Now out of office, his warning today therefore deserves the widest possible discussion around the world: “I despair of the way in which EU leaders are […]

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