EurO & GoLD tO GaiN b4 FaLL - June 11-15
There are two major topics dominating the global financial markets. Europe is taking the lead due to numerous problems in the Euro-zone and weak economic signals coming from USA, which is considered the global economic power. In percentage terms, the total global trade share of Europe and USA is over 70 pct that includes exports and imports.
The problem is that the current size of global debt has reached close to about USD 200 trillion, which is 3-times the size of global GDP. In 2002, it was estimated that the size of global debt was roughly around USD 85 trillion. Weather it’s lending or borrowing, funding or generating of funds, every economic activity is somehow or the other is linked to debt.
Debt is now leading the world’s financial misery. Spain that has sucked in EURO 330 billion funding needs more money for bank capitalization as it still remains a big threat to global economies and if the problem is not temporarily sorted out it will spill over into the Euro region banks that can drag other leading global economies. Some of the estimates suggest that Spain’s banking system still needs around EURO 250 billion to overcome the problem.
On Friday, Fitch rating agencies was quick to sense the problem and downgraded Spain’s long-term credit rating by 3-nothches to BBB, which are 2-notches above “JUNK” with “Outlook Negative”.
I am sure that in their meeting, financial stability will be the key talking point for the European policy makers that needs quick attention and some sort of announcement before June 17 Greece election to avoid spill over that could lead to financial market collapse. Therefore, to accommodate Spain, bailout money has to be made available by once again breaching the
European laws with conditionality attached to save their faces.
Meanwhile, another major event coming is FED’s FOMC meeting in next 10-days time. There is a huge debate going on that if FED will opt for quantitative easing (QE3), which is basically pumping of liquidity in to the banking system through purchase of T/Bills and Bonds, or FED will consider extending USD 400 billion twists, which is swapping short-term bonds with longer duration that helps to keep 10- years and 30-years bonds yield low.
This market will be focusing on speeches from FED officials prior to FOMC announcement for clues about monetary policy. Some of the other major economic events are release of economic data’s. On Monday, main event will be speeches by 2-Fed official. On Tuesday, UK’s industrial and manufacturing production data will tell us about short term growth an important GDP growth component. Later in USA will be releasing quite a few economic data’s, which may be of less importance but will provide feeler about the economic performance. On Wednesday, quite a few economic numbers will be released, but German CPI will be keenly watched. However, USA will release barrage of economic numbers PPI, Retail Sales and Business Inventories that could help in determining next policy direction. Thursday is another active day and the major event of the day will be decision on Swiss Interest Rate followed by ECB monthly report and data. Later, US CPI, Jobless claim and Current Account data will give more clues about the economy. Friday is another bus day in terms of economic data, which will provide more evidence about the global economic activity. The day will start with BOJ decision on interest rate to be followed with UK Trade Balance number, then European Monetary Union will make announcement on trade balance with all eyes on USA for release of quite a few data’s of which, Industrial Production and Michigan Consumer Sentiment Index are important US economic indicators.
LasT WeeK - JunE 04-08
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Comment by Peter jcp on June 10, 2012 at 10:03am -
Hi Asad - from what I gather global GDP as also more than doubled through the last 10 years of which over 5 of those years have been in a world wide recession. US and Europe might have counted for 70% of the total global trade share - but more recently and now on going countries like China, India, Russia etc will be making a lot larger contributions.
When you hear the figures you mention - it does make you realize the problems the World economy faces. If you try and correlate it to us as individuals - for years in the UK the largest individual debt would be your property and you could borrow on a mortgage up to 3 times your salary. Then during this last decade the rules were relaxed and changed and suddenly people could obtain 4 then 5 and even up to 7 times their annual salary. Then the bubble bursts and I start to think of a "pack of cards" along with the word "collapse"..
Can we get out of this massive problem? . - yes I believe so
But i do think it needs the worlds powers to cooperate and some are going to lose out a lot more than others. Will they be prepared to do that might be the question?
Have a good week
Regards
Peter
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Comment by Manish Patadia on June 10, 2012 at 10:35am -
what in gold coming week
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Comment by Ronald Mewengkang on June 10, 2012 at 10:44am -
do you have any other web that i can subscribe to?
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Comment by asad rizvi on June 10, 2012 at 10:57am
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Helo Peter,
According to Wikepedia (2011 Estimates)
Brazil $ 470.4 Billion
Russia $ 808.7 billion
India $ 792.3 billion
China $ 3.561 trillion
There are still small numbers and keep in mind that BRIC have grown into size only this decade.
Furthremore,
Things are much beyond Recession/Inflation/Low GDP/Debt/ Foreign Investments/etc. I am no more impressed with the accounting or economic numbers because they are they are all false and incorrect to divert market concentration from REAL POBLEM.
To give you an example about a month ago Spain needed $ 60-70 billion, today world financial thugs are celebrating that Spain is blessed with another Euro 100 billion bailout package. In next few months they will ask for more, then you here its Italy’s turn and so on.
I am just wondering that why people are so naïve and does not understand the crux of the problem. Who are the beneficiaries of Trillions and why are they being compensated for their follies? Why should the Tax Payers and Future Generation suffer for the sake of this so called rich elite? Large part of the world population from East to West is struggling for jobs and food. If the quantum of problem is so huge then why doesn’t the price of food, real estate and oil fall?
Here is the catch, “Simply to Protect the Elite Class”
Who are the law makers? Those getting hefty perk to protect their masters? Who are the
masters? They are the Rulers and Law Makers.
Where those wonder full Business Brains that are were picked from LSE, Harvard, Wharton, Insead, Stanford, HK UST, etc.
Why world Regulators, SEC, Central Bankers, Rating Agencies are not put behind the bars?
Why doesn’t the World court (Judges) take So Moto action against these thugs? They are supposed to provide justice to the innocent
Are they not the real culprit working for the shareholder at the cost of tax payer’s money?
Why frequently Buildings, don’t fall, Bridges do not collapse and Roads & Highways not washed away. Why there is always a financial collapse?
You know why? Because the world leaders do not come from a poor family, as they mostly belong to the elite and work for them.
Last year, even Merkel succumbed to the parliament and world leader’s pressure and had to sign a bailout treaty for Greece against here peoples wishes.
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Ronald Mewengkang, you can send me your e- mail address at trendteller@gmail.com I will provide you access.
Tha
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Comment by Andre on June 10, 2012 at 11:18am -
Hi Peter,
I wonder if the correlation between the global meltdown and us as individuals doesn't also have a deeper level, on the level of the phyche, that comes into play here.
Since the inception of the capitalist system in the 18th century one of the basic principles of that system was :'survial of the fittest'. 250 years ago, this was a workable situation as the general public didn't have 10% of our current mental abilities or for that matter material desires, and the few that understood the system could have a field day in accumulation whilst the rest of society just went on with their daily lives, living in large communities where they were oblivious of any of this and life was about eating, sleeping, fornicating and going to church, and of course working to fill the pockets of the elite. That was all that life was about for the majority.
Now, many years on, we have a large proportion of society with a greater intellectual awareness and the race to accumulation has reached critical levels, as there is just not enough available to fulfil all of those desires, or more acurately ego-based needs.
But as nature has shown over and over again, there is allways equilibrium in all we see. Many times when things go way too far to the one side, there is allways a response in the opposite direction in order to bring balance. Even in the cosmos we can see the same happening in the cyclical way that balance is created. Stephen Hawkins talks about expansion and contraction of the universe. This is balance. Or the destruction of 98% of life during the jurassic shift, just for it to re-emerge in a way that makes 'more' sense. This also is a form of balance.Or when someone goes crazy to the point that they either die or let it all go and become peaceful again lol. Also a form of balance.
The basic understanding that I have of our global situation is that we have reached a point where a major shift is imminent, and that that shift will occur in order to bring some kind of equilibrium. If we think that we are going to see the end of this situation by subscribing to the same set of rules as we have in the past, we are in for a big surprise. The movies Kymatica and Zeitgeist explains this brilliantly. Our system cannot continue ad infinitum.
Lasting solutions will only come if world leaders start to act with a greater sense of compassion towards the humanity. They need to build in a new indicator where the wellbeing of people becomes an integral part of the equation. Only problem is that the wolves around us will try to put a stop to that and that's when the real revolution begins and a shift will initiate.
What's going to happen to the currency market??? Who knows ! For now I believe that the Euro is going to behave like the carefully worded speech of the Spanish finance minister. Going to try to be brave and act as if nothing is wrong and off course the neccesary retracement, probably to 1.2745,to keep the bearish trend intact and then fall again. Who knows? That's if the market makers allows it ! hehehe!!!
Regards
Andre
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Comment by Peter jcp on June 10, 2012 at 11:27am
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I agree with you Asad - unfortunately the very rich are getting richer - so that shows something is drastically wrong within our economies and laws. And as regards to the figures etc as you say they are mostly incorrect and false. Forget global warming and all the "red herring " stuff - we need to first get our houses in order and sort out the "core" issues - money - and where's its going to- and then start the on going reforms to get to a "more level playing field" based on proper values - not just heritage and power.
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Comment by Peter jcp on June 10, 2012 at 11:42am
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Interesting comments Andre and I agree with your overall thoughts. I am in my "mid 50's" and since I was born the World population as doubled to over 7 trillion. The world is far more developed and with international travel and super quick communications possible - we are in a different era now from the past - and changes will have to happen. I am a great believer in democracy and a "laissez faire" type society - but only when there is a fairness. Corruption, lies and greed has taken over. Goodness has to prevail and I believe the large majority all around the world do want this - but will the "powers" above allow it ?.
Re currencies - it gets more fascinating every week ;-)
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Comment by Andre on June 10, 2012 at 2:03pm
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Hi Asad,
Instability creates control....and that in turn creates wealth !
But I do believe that the time of the super-elite is coming to an end (they know it too ) if they want it or not, because the global community as an extension of this physical planet will revolt strongly.
We are priviledged to be able to live in these times; what a show !
When the truth REALLY comes out that America is more bankrupt than even Greece, and Bernanke & co start printing even more money for not having any other choice or just their simple desperation as the masters of quick fixes.....hyperinflation sets in.....THEN the great leaders will rise and start a new era, not before.
Have a great week
Kind Regards
Andre
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Andre,
This Hide and Seek or Passing the Parcel Game with the support of so called Bailout/Firewall/Support Fund/Conditional Funding/Downgrade will be played for few more years and so called supper elite will continue to have fun as long as they get protection. But Boom and Burst will happen more frequently.
Asian crisis is a Good e.g., it took almost a decade for US Housing crash to happen which was soon followed by European crisis and since frequency of financial unrest has sped. About 6-month ago Europe was about to collapse, the world leaders had to gather in emergency to engineer some more accounting gimmick and the Firewall came into existence.
The frequent emergency gatherings/talks of world leaders speak in volume about problems. There are ones running and dictating the world financial affairs. The Financial Heads acts a signatory to the cheque and the Central Bank Bosses acts as clearing house to help in transfer of funds to another account.
Financial market is the biggest ever and will always be the biggest beneficiary of computer technology. With computer entry, printing of unknown amount of Trillions of US Dollars/Euro would not have been possibly that also required storage facility and insurance coverage.
Yes, Hollande of France is the first hope and if Syriz win of Greece election his win may strength the hope. But it is too early to make a comment that if Hollande will stick to his election agenda or will succumb to the global bureaucratic pressure. In future I will not be surprised to see shuffling of election results.
Only time will tell that how much more time is required for the global bubble to burst.
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