Thursday, February 18, 2016

Negative Interest Rates to Set Stage for Next Crisis

Stephen Samuel Roach, an American economist who serves as senior fellow at Yale University’s Jackson Institute for Global Affairs and a senior lecturer at Yale School of Management recently warned of new risk that will be introduced through NIRP.  He warned that NIRP will set the stage for the next crisis.  Or is this the beginning of one?

Here are some comments by him, NIRP "could well be a final act of desperation, central banks are abdicating effective control of the economies they have been entrusted to manage. First came zero interest rates, then quantitative easing, and now negative interest rates — one futile attempt begetting another." and "could be the greatest failure of modern central banking. Yet denial runs deep. ".

How will this lead to?

"The shift to negative interest rates is all the more problematic. Given persistent sluggish aggregate demand worldwide, a new set of risks is introduced by penalizing banks for not making new loans. This is the functional equivalent of promoting another surge of “zombie lending” — the uneconomic loans made to insolvent Japanese borrowers in the 1990s. Central banking, having lost its way, is in crisis. "

What is negative interest rate policy or NIRP?


More and more major central banks around the world are experimenting with this policy. 

Do you know that this is something new that has never been tested before?  

Some say this "are signs of "policy exhaustion" from monetary authorities", "dangerous experiment" and "sign of desperation, a signal that traditional policy options have proved ineffective"

According to Jim Rickards, NIRP are symptoms of currency wars intensified. "Stock markets are spooked, and investors are piling into Treasury bonds and gold." Where will this lead to?

Here's what Jim says

Helicopter Money is coming. Why, when and how?

What is the helicopter money that is gaining momentum? How is this going to be done? What is the consequence when this happens? Check Jim Rickard's latest take on the world economy.

"...The current behavior in the stock market is exactly what I’ve expected to see at the beginning of a recession, too. Stock markets are leading indicators of recession. They typically go down about six months before recessions begin.
...

Printing money is only half of what’s necessary to produce inflation. The other half is lending that new money… having people go out and spend it… have banks leverage that money through credit creation and so on. That has not happened."

If the banks are not lending out money to create spending, who will do it next?

Thursday, July 23, 2015

Jim Rickards' Take on China's Gold

Jim has a different take on China's gold than many gold bugs and bloggers. I find his explanation and analysis makes a lot of sense and in line with the current Chinese political and fiscal policies.

What is China trying to do? What rules are they to play along? Best of all, his final advice on gold price:

"It will go higher when all central banks, China’s and the U.S.’ included, confront the next global liquidity crisis, worse than the one in 2008, and individual citizens stampede into gold to preserve wealth in a world that has lost confidence in all central banks.

When that happens, physical gold may not be available at all. The time to build your personal gold reserve is now."

Wednesday, July 22, 2015

Top Money Managers Deemed Gold Undervalued First Time in 5 Years


With the current beaten gold price (paper market), many gold stocks have been slammed and oversold.  This is attracting attention from a number of top money managers to turn to gold.  According to the BofA Merrill Lynch Fund Manager Survey for July, "gold judged undervalued for first time in five years."

In fact, gold has been undervalued for a long time with all the money printing by the various central banks around the world.  Gold price may continue to drop as the Fed keeps its talk on interest rate rising, which is causing the US Dollar to rise.  But as soon as they decide to delay this decision in view of the current deflationary economic situation around the world, gold price will shoot up again as people move away from the US Dollar into hard assets like gold and silver.

So be sure you own some physical gold or silver and mining stocks while they are much hated.

Sunday, June 28, 2015

Will There Be A "Grexit"?

Will Greece leave the EU? What will happen to the Euro if a "Grexit" happens? What will happen to Greece economy if they leave the EU?

Check out Jim Rickard's take on this current development in Greece.

"Greece’s headline drama will unfold the same way it has for the last five years. There will be a lot of turmoil. I’m not saying there aren’t problems in Greece; there are big problems there. But what I’ve said all along going back to 2010 is that Greece isn’t leaving the euro; there will be no Grexit.

Nobody’s going to get kicked out or qui
t..."

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Tuesday, April 28, 2015

What Will Happen to Gold When the Chinese Yuan Joins the SDR Basket


There has been much speculation recently regarding the likelihood of China announcing a much bigger gold reserve for possible inclusion of the RMB (renminbi – or yuan) into a reset IMF Special Drawing Right as a preliminary move towards recognition of the yuan as a global reserve currency.

What will this mean to its pegging to the US Dollar? Will it continue to peg itself to the Dollar?

When the Chinese yuan is included into the SDR basket, what will this mean for gold and the Chinese currency? Bearing in mind that the Chinese has been aggressively accumulating gold in the past few years. This is an event to be watched.

The IMF will be holding a meeting in May which will start to discuss formally any revisions to the composition of the SDR. A second meeting will be held in October which will confirm any new changes and the revised SDR basket will come into operation on January 1st 2016.


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Tuesday, January 20, 2015

Jim Rickards : Brace Yourself for an Epic Economic Meltdown

By Jim Rickards : Over the coming months, I believe we could see an economic meltdown at least six times the size of the 2007 subprime mortgage meltdown.

Circumstances lead me to believe it could play out like the meltdown I experienced in 1998 after Long-Term Capital Management (LTCM) failed.

This time, however, there will be several crucial differences that will leave investors and regulators unprepared....

The next financial collapse, already on our radar screen, will not come from hedge funds or home mortgages. It will come from junk bonds, especially energy-related and emerging-market corporate debt.

The Financial Times recently estimated that the total amount of energy-related corporate debt issued from 2009-2014 for exploration and development is over $5 trillion. Meanwhile, the Bank for International Settlements recently estimated that the total amount of emerging-market dollar-denominated corporate debt is over $9 trillion.

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