This is why we are facing a K-shaped recession. Companies and investors have a difficult time ahead. They not only have to navigate a potentially major downturn. But they also have to completely reposition their portfolios for the New Normal world that will follow.
Chemicals and the Economy
$50bn hole appears in New York financial markets – Fed is “looking into it”
Most people would quickly notice if $50 went missing from their purse or wallet. They would certainly notice if $50k suddenly disappeared from their bank account. But a fortnight ago, it took the New York Federal Reserve more than a day to notice that $50bn was missing from the money markets it was supposed to […]
US Federal Reserve aims to devalue the dollar, again
What we “assume” can make an “ass of u and me“, as the proverb says. And that is certainly true of the way central banks have manipulated the major currencies since the financial crisis began in 2008, as the chart shows of the US$’s movements versus the Japanese yen and the euro: It shows the change […]
“Deflation fears spark shock ECB rate cut”
The mention of deflation in the above front page headline of Friday’s Financial Times will not have surprised blog readers. But it appears that not enough people in the European Central Bank read the blog, as the FT went on to report the ECB’s sense of “shock” at the thought that deflation could now be just around the corner. This highlights the enormous […]
Crude oil and commodities decline as dollar rises
Friday provided a good test of the blog’s analysis that Japan’s aggressive policy of devaluing the yen could result in major downward pressure on crude oil prices: • The yen crashed through the $1: ¥100 level, ending at a 4-year low of $1: ¥101.6 • Brent sold off by $2.80/bbl, only recovering after Asian markets […]
Japan leads round of competitive devaluations
The blog remains very concerned that, overall, the economic policies adopted during the current Crisis are leading the world economy to the worst possible outcome. This outcome is totally predictable. Indeed it has been predicted by reputable experts for some years. Yet most policymakers still seem intent on dealing with symptoms rather than causes. As […]
Devaluations risk leading to a Cycle of Deflation
In February, the blog worried that we were at the start of a cycle of deflation, as depicted in the above chart from Comstock Partners. The warning signs were that major excess capacity was developing in many industries, and some major countries were devaluing. Since then, the US and China have both undertaken competitive devaluations […]
Competitive devaluations begin
Last month, in discussing the ‘Cycle of Deflation’, the blog worried that “the risk is that we now see a round of competitive devaluations, as other countries also try to support their exports, and reduce import penetration”. On Thursday, the Swiss National Bank announced that the Swiss franc’s strength was “inappropriate” and said it would […]
The cycle of deflation
US fund managers Comstock Partners reported a 50+% gain on their flagship Capital Value Fund in 2008. The logic behind their out- performance is summarised in the chart, which depicts their belief that we are now in a global cycle of deflation. Their analysis is that this cycle: • Began with a rise in savings […]
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