Posts Tagged ‘exchange rates’

The mindset will not change; a depressionary relapse may be coming – European version

The mindset will not change; a depressionary relapse may be coming – European version

Courtesy of Edward Harrison at Credit Writedowns 

68-1533). Left on River.

In March I wrote an American version of this post which pointed to the bailout culture in America as a major reason I fear a depressionary relapse. American policy makers have shifted private losses onto the government’s books while propping up bankrupt companies in the private sector in order to forestall yet greater economic pain.

The mindset is fixed on re-engineering some semblance of past economic growth. The result has been a return in the US to the status quo ante of low savings, excess consumption, indebted households, and leveraged financial institutions, but with policy options significantly diminished and greater levels of government debt to boot. Clearly, when stimulus is withdrawn, policy makers should expect more severe economic bloodletting.

In Europe, the same bailout mentality is at work. However, the results are likely to be even more disastrous because of the fundamental misunderstanding of economics and financial sector balances amongst the policy elite in Euroland. The public and private sector cannot simultaneously net save unless the Europeans engineer a competitive currency devaluation. Therefore, the Europeans’ newfound fiscal austerity is at odds with the need of the private sector to reduce debt and will likely lead to a collapse in consumer demand and depression or a trade war. What Europe needs is to allow over-indebted nations to default, reducing the political and economic pressure of austerity.

Intra-Eurozone Trade wars

Canton, May 1858. Sale

Let me review how I come to that conclusion. This is a trade issue, first and foremost. The reason the Eurozone exists from an economic standpoint has to do with European interdependence from business trade. The eurozone functions as an internal market much the way the United States does, with the majority of trade occurring inside the region as opposed to externally with non-Eurozone countries.

When the Euro was formed, exchange rates were fixed and a common monetary policy came into being – much as we see for states in the US or provinces in Canada. Of course, monetary policy is not run for specific regions within the zone, but for the zone overall. And this invariably means that the European Central Bank’s monetary policy is geared more to the slow-growth core of Europe than the periphery.

During any business cycle then, current…
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The Looming European Debt Wars

The Looming European Debt Wars

Courtesy of MICHAEL HUDSON, writing at CounterPunch 

B-1B destroys al-Qaida torture compound in Iraq

Government debt in Greece is just the first in a series of European debt bombs that are set to explode. The mortgage debts in post-Soviet economies and Iceland are more explosive.  Although these countries are not in the Eurozone, most of their debts are denominated in euros. Some 87 per cent of Latvia’s debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. So their government borrowing by non-euro members has been to support exchange rates to pay these private-sector debts to foreign banks, not to finance a domestic budget deficit as in Greece.

All these debts are unpayably high because most of these countries are running deepening trade deficits and are sinking into depression. Now that real estate prices are plunging, trade deficits are no longer financed by an inflow of foreign-currency mortgage lending and property buyouts. There is no visible means of support to stabilize currencies (e.g., healthy economies).

For the past year these countries have supported their exchange rates by borrowing from the EU and IMF. The terms of this borrowing are politically unsustainable: sharp public sector budget cuts, higher tax rates on already over-taxed labor, and austerity plans that shrink economies and drive more labor to emigrate.

Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that can’t (or won’t) pay may be their problem, not that of their debtors. No one wants to accept the fact that debts that can’t be paid, won’t be. Someone must bear the cost as debts go into default or are written down, to be paid in sharply depreciated currencies, but many legal experts find debt agreements calling for repayment in euros unenforceable. Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere “haircuts.”

There is no point in devaluing, unless “to excess” – that is, by enough to actually change trade and…
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Zero Hedge

Toronto's Housing Bubble Is Crushing The Strip Club Industry

Courtesy of ZeroHedge. View original post here.

Until now, Canada's soaring housing prices were just another innocent asset bubble spawned by low interest rates and an endless supply of Chinese cash that needed to get laundered.  That said, massive bubbles are almost always followed by severe unintended consequences that can have a crippling impact on society as a whole...and in Toronto those unintended consequences are now manifesting themselves in the form of a rapidly deteriorating supply of strip clubs.

As Bloomberg points out today, the soaring value ...



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Phil's Favorites

In Stunning Victory, Democrat Doug Jones Wins Alabama Senate Seat; Trump Responds: "A Win Is A Win..."

 

Source: NY Times

****

Courtesy of Zero Hedge

Update: President Trump has reacted to Doug Jones' victory:

...

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Digital Currencies

Not A Bubble?

Courtesy of ZeroHedge. View original post here.

Meet The Crypto Company - up almost 20,000% since inception in September...

To a market cap of over $12.6 billion...

Grant's Interest Rate Observer drew the world's attention to this 'company' yesterday.....



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Insider Scoop

The Market In 5 Minutes: Bitcoin, Comcast Drops Fox Bid, FOMC Meeting Begins

Courtesy of Benzinga.

Related SPY Analysis: Here's What Washington Is Likely To Accomplish By Years' End First Artificial Intelligence ET...

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Chart School

Small Caps and Semiconductors Still in Shorting Territory

Courtesy of Declan.

While it was good day for Tech and Large Cap Indices it was a more muddled day for the Russell 2000 and Semiconductor Index.

The Russell 2000 wasn't able to enjoy the fruits of what was low key buying experienced in other indices. A second doji in a row gives shorts something to work with as the 'Bull Trap' continues to influence buyers behavior.


The Semicondcutor Index was able to post similar gains as other lead indices but hasn't yet done enough to challenge its 50-day MA. ...

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Biotech

DNA has gone digital - what could possibly go wrong?

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

DNA has gone digital – what could possibly go wrong?

Courtesy of Jenna E. GallegosColorado State University and Jean PeccoudColorado State University

Modern advances come with new liabilities. Sergey ...



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ValueWalk

Tax Bill May Spark Exodus From High-Tax States

Courtesy of FinancialSense.com via ValueWalk.com

The following is a summary of our recent podcast, “Exodus – The Major Wealth Migration,” which can be listened to on our site here on on iTunes here.

It’s looking increasingl...



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Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



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Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!

...

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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

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Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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