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SP500: Grind and FizzlesWhilst one of my trading systems (as displayed) doesn't yet display Exit-Long signals, I have been pre-empting some expected volatility which I perceive can arise due to what can be an lengthy infrastructure Bill process along with the Debt Ceiling fiasco. I detailed this in an earlier post. Up to this point I have been happy to ignore exit signals based on perceptions of market risk and fiscal support - noting the SP500 index in this model, is assumed to represent a US GDP growth function along with an 'off-risk' overlay. Where I have low market risk, clear fiscal support (infrastructure bill is committed to), Covid-19 strains (delta strain) understood and the ridiculous debt ceiling overcome, I will assess if it is appropriate to be Long or Longer the broad US market. I expect the market to pull-back, and will assess being long on limits at lower prices. #adam-cox
AMEX:SPY
by Adam-Cox
Hourly Analysis for the GBPUSDThe GDP/USD pair is showing a bearish trend which is likely a correction wave of the steep upward trend. there according to mu analysis if the on Monday it forms a bullish that breaks the highs of the previous candles, i will buy putting my stop loss on the white line, Or if it breaks the trendline and support yellow line with a candle lower high than that of the previous candle i will sell with my stop loss on the white line and take profit on the demand zone done.
by kabugoblasiom
Market Outlook WeeklyTVC:SPX using a log chart I channeled the market since it's inception. The top of the channel (in red) is exclusively where the major stock market crashes have happened. The bottom channel (in green) is "crash free." The bold purple line is where 3 of last 4 market crashes have happened. Since the "Nixon Shock," $spx has failed to breach this line, except during the "dot-com bubble." U.S. inflation rates are rising, the Buffet Indicator (divide by US GDP on the chart) is at an all time high, and the CAPE (SPX ECY on chart) is starting to. rise, like it has at the top of every crash. However, a major crash has not when CAPE is above that black line, excluding COVID. Note: Not claiming a crash now, just saying there are some warning signals and to be cautious.
TVC:SPX
by StkMktBulldog
Gold - Long Post FEDGold has continued it's upward momentum and consolidated above resistance at $1821 after yesterday's FED meeting. Powell gave no indication on when the FED would start tapering or to what extent as despite progress with regards to employment and inflation goals it was suggested that additional improvements would be required. This led to Gold surging and we believe the precious metal could move higher and reach multi month highs about $1900 in the coming weeks. Today GDP growth rate came in at 6.5% vs 8.5% forecast and initial jobless claims cam in at 400K vs 380K forecast. Additionally, tomorrow we await PCE price index and Michigan consumer sentiment for any significant price action.
FX_IDC:XAUUSDLong
by KQMarkets
How the west economy is reliant on modern atlantic slave tradeIf Hitler started an NGO to give money to poor Palestinians he'd have exterminated the jews with western donations. If you take a 10 year old kid the cost for the west to produce a wageslave will be higher, maybe 40k, but it's still money saved, and they can start the brainwashing younger. The west is losing their grip on Africa, things will change. Migrants will stop coming and even leave and this will happen before the end of the century: - Cheap healthcare personel will not exist anymore - Sexual exploitation of poor women by boomers will end - Nationalists will let it happen with a smile of relief - The economies will tank, the standard of living will be below east europe (already almost there) - Ethnic tensions will go up in the west like Yugoslavia - You will kneel and kiss our feet, and we will enslave you - I will point and laugh and say "told you so" I think part of it is the french want revenge for getting enslaved for centuries by pirates and sahelian tribes. Don't you worry, will all the harm you have done soon things will go back to normal "just comply and you will gain your freedom soon enough". Libya same story. The country societal pillars were destroyed by the west commies with their childish utopias. And the council of tribes said Gaddafi son was the only one they'd let represent them. Tripoli is in the hands of militias of slavers, well done democracy. Once the west falls, and it will snowball as migrants will stop coming and even leave, Africa will finally be able to get rid of this "democracy" (even the USA doesn't have a direct democracy, why doesn't west Europe try to bring their utopia there?), and go back to solid traditional societal pillars. The tribes will manage to agree and work together. The danger is to overdo it, to become too traditional. Under Ghadaffi Libya was very developed, the before after pictures are insane. The Emirate Arab United managed to united, I do not know this place well and I know they are 10 times more indian workers than arabs but at least they worked together and got very developed and rich. It's beyond belief how gullible and stupid and submissive westerners are, I do not wish to ever argue with them, they will be the slaves of the arabo-berber tribes because that's all they are good for. With the exception of Anglo-Saxons and Vikings as covid has proven. The stereotype was true who would have thought? "Oh noes so much war and misery in Africa" gee yes I wonder why, and it always happens after you help them damn how come? Must be 5000 coïncidences by now. Lmao the black arab-berber Toubou tribe of south Libya has 33% R1b dna markers, this is the gene from west Europe, how did it end up there? XD Slaves from the coast south of France is my guess. It's ok to mix with them because it is the same race. And they can select the ones they want to keep in their gene pool. 400 AD south of Roman Gaul: "These puny barbarians can't touch us we are advanced" 500 AD south of Roman Gaul: Frankish rulers overhear the gaul nobles they just shaved say it was "humiliating", for daring to say such a thing they are put to death :) When pirates captured Julius Caesar he told them "I will come back, I will find you, and then I will execute you" They laughed And then he came back :) Here is a printable version:
FRED:GDP
by MrRenev
1
XAUUSD 1H Huge Volatile OpeningsMorning guys, XAUUSD has been consolidating around since the metal dropped on the 17th of June to around 1770 with lows of 1760. The metals bearish outlook stabilised since then and we've been patiently waiting for the bulls to push 1800. Whilst we've been waiting, opportunities to ride the consolidation up and down have opened and these have been pretty solid as we expect XAUUSD to bounce between consolidation support and resistance lines. The following graph shows how we can take advantage of this today at the start of the European session and heading into the American session whilst also gearing up for the Initial jobless claims 4 week average and the GDP annualised. Dependant on the outlook of those reports we could see gold take a dip as I expect the IJC to look promising, this would only create a great buying opportunity and we can expect the GDP annualised to look poor due to obvious reasons. This should just remind all the bears out there that we're still reeling from all the financial shockwaves of the pandemic and huge government spending. Again, inflation is surging and by no means is the USD out of the woods. In the attempt to keep this one short and sweet, technically, we can see XAUUSD rising to the previous resistance of 1795 with the hope of bounding further on to the famed psychological level of 1800, couple this with the reports released today and we can see volatility playing a major factor towards 1820 and beyond although this remains unlikely. The support at 1795 will look reasonable strong and i feel if we break that we'll definitely push onto 1800. Risk management has me being cautious of the 1760 mark as if gold hits that I feel will continue to fall as the bears rally and USD bulls push on the move of the reports. Have a great day guys!
FOREXCOM:XAUUSDLong
by KaineArkinson1
The US & EU terrible demographics: What to expect and solutions.Japan, which today is the oldest country in the world, had a weird looking demographic "pyramid" 30 years ago, with a big bump in the 40s, there were 75% more japanese in their forties than 0-9 years old. What could possibly go wrong? Japan was the new superpower, everyone invested in Japan. And then it all collapsed. As usual it got so bad they actually ended up undervalued, and George Soros invested in the Nikkei before the rally a decade ago, probably using his large Forex knowledge to time the stock market. And yes he also bet on the Yen at that time and it worked very well. So what happened the the Japanese economy? In the late 80s the japanese economy surpassed the Soviet Union! That was mind blowing to everybody. And in 1995 it grew to the size of Germany + France + UK. In 1995, after the stock market - which was in a gigantic bubble - crash, it was 5,500 billion usd big. The stock market crash is not what ended the Japanese economy! At the time the USA were 7,600 big, so the little island was ~75% the size of the US! They were so advanced, people thought they'd conquer the world with giant robots. They were really ahead of everybody. And then the japanese started to retire, and as they aged demanded more and more support from the youth, more healthcare... tradingeconomics.com Germany and the UK have grown their economies, the UK even got ahead of France which I'm sure has nothing to do with anti-business laws. And Italy has already collapsed (since 2008), their brilliant solution was socialism, the downtrend will last a long while. But the big most noticeable ones are the Americans. Now the USA economy is two and a half times bigger than Germany + France + UK! How could a bunch of rednecks that love to fire guns in the air and mentally unstable drug addicts get this big? Their population has grown unlike the west europeans, but not that much. And they're hitting the wall NOW. A major explanation is their economy got way overheated (which had the secondary effect of creating lots of entitled recently born americans), in part because they attract the smartest migrants and all the foreign investments. NO you can't make people work till they are 80. Past 50 like it or not it's all downhill from here. Here is the productivity chart: Migrants: This is something that Japan has not done. They did not take migrants in, and they also did not (net) import goods to "buy time". West Europe and the United States have bet everything on importing migrants; which seems it might be a very profitable strategy: 0 cost to breed and raise workers, Africa for example has the charge of raising them, and Europe gets them entirely free once they reach working age. The US Department of Agriculture reported that the cost to raise a child born in 2015 to 17 years old would be an estimated $233,610. 10 million migrants = 2,330 billion us dollar saved. And if they are qualified and 25 years you save university and the first years of gaining experience costs. The EU had talks of importing 50 million migrants. At a cost of $200,000 per unit, since these are considered exchangeable pawns the word unit is adequate, that would be $10,000 billion saved! The foreign aid Africa has received for the past 70 years is estimated at around $1,400 billion. Muslim countries that provide many cheap workers obviously do not get anywhere near that amount. And I cannot tell how much money the west spends in anti-African propaganda - working on that negative "poor and violent Africa with no hope" image to push young africans to want to migrate to the west, also know as the second welfare objective (to keep them down and dependant rather than force them to build their own economies), the first one being obvious: "Keep dem kids alive and keep breeding, we want our workers!". The problem is... It is not working perfectly... You see, life is not a video game, and people are not interchangeable pawns. I'm not saying it doesn't or can't work I am just saying it is not working PERFECTLY. The west is facing more and more diversity issues just like Africa and Israel. And this everyone agrees on regardless of their politics, those on the left say it is because of systemic racism, and the other side say it's because people are different I guess. Just as long as we can all agree. Racism or not if you look at Yugoslavia they were the same race, culture, economy, history, and they still killed each other. It is a difficult subject to write about since for some people if you do not say everything will work out great you are automatically an enemy. So how do you even talk about it? You can't. Publicly. Just have to play dumb and act surprised. Ye well I might have to pretend to be stupid but my money won't be acting surprised that I can tell you. I am obviously not going to develop the subject. It may or may not be a viable solution, either was there are obstacles. On the other side of the flying pancake on a giant turtle's back China is facing the same issue. The CCP was surprised to learn the awful demographic numbers a few weeks ago, and started a new 3 child policy as well as fighting feminists. How could they possibly create a 1 child policy and never manage it? Seems unreal. But anyway, now they got a disgusting demographic pyramid, and it will take at best 25 years to fix. China is not looking for migrants to support its aging population. So it would appear they are going to follow Japan? NOPE. See, China has something very special: The USA & West Europe owe China A LOT. Africa owes them too. The world owes them trillions. In theory they could just lay back, relax, and let the world work for them. In practice they might have to use their military to get what is rightfully theirs. But the USA, Germany etc have their own issues and can't really pay up... Will be a big big problem. I am not an expert, I invest in the short term in the currency markets, like every decent "specialist" I know and take an interest in about everything that gravitates around but is not exactly my activity, but I don't really get into it, I stay focus in my area. If you want to know more about the subject, some people of whow the job it is - doesn't necessarily mean they are good at it or know more than me, but they may, at least they have researched the subject extensively - write about the subject. There are articles, "official" reports on the subject, as well as books. An economist that was on the United Kingdom Monetary Policy Committee and an economist that was Managing Director at Morgan Stanley wrote a report available on the website of the Bank of International Settlement, and according to them big money does read what they publish: www.bis.org
Education
by MrRenev
4
Euro rises, German business confidence nextThe euro has started the week in positive territory. In the North American session, EUR/USD is trading at 1.2220, up 0.32%. Monday is a national holiday across much of Europe, and there are no economic releases out of the eurozone. Still, the euro is showing some strength and has punched into 1.22-territory. German data will be in focus on Tuesday. The well-respected Ifo Business Confidence Index will be released for May (8:00 GMT). The index has accelerated over three straight months, and the upswing is expected to continue. The May consensus stands at 98.2, compared to the previous release of 96.8. Despite the optimism in the business sector, the German economy is in trouble. In Q4, GDP contracted by 1.7% and an identical decline is expected for Q1 of 2o21 (6:00 GMT). Two consecutive declines would mean that technically the German economy is in recession. However, investors remain confident that Europe is turning the corner on the Covid-pandemic, so it's unlikely that the GDP report will weigh on the euro, unless GDP is much weaker than the forecast. The euro continues to trade at high levels and could head upwards, as expectations that the Fed might tighten monetary policy appear to be have been premature. Several Fed policymakers have urged the Fed to discuss tapering QE in the coming months, but the market appears to have internalized the Fed's message that inflation is transitory and that the US economy is still in need of massive stimulus. At the same time, if US numbers continue to point upwards, in particular inflation and employment numbers, then we again see speculation about tapering and a higher US dollar. In the meantime, the US dollar remains under pressure. EUR/USD is testing resistance at 1.2242. Above, there is resistance at 1.2303. On the downside, there is support at 1.2123, followed by 1.2065
by OANDA
Pound flat after GDP data, US CPI nextThe pound is showing limited movement in the Wednesday session. In European trade, GBP/USD is trading at 1.4132, down 0.07%. On the fundamental front, US CPI is projected to come in at 3.6% year-on-year in April, up from 2.6% in March. If CPI outperforms, it could raise expectations that the Fed will move sooner to tighten policy. UK GDP numbers were a mixed bag, as the economy contracted in the first quarter of 2o21. At the same time, The monthly GDP outperformed. Analysts had expected the British economy to shrink in Q1, and this was the case, with a GDP read of -1.5%. This was slightly better than the forecast of -1.7%, but pointed to a bruising quarter, as the economy was hampered by lockdown restrictions and trade disruptions due to Brexit, such as the buildup of containers in British ports. The GDP report was also a "cup half full", as March GDP was stronger than expected, with a healthy gain of 2.1%. This easily beat the estimate of 1.3% and was well up from the February reading of 0.4%. The March expansion reflected businesses preparing for the first stage of the reopening of the economy, which occurred in early April. There was more positive news from the manufacturing front, as Manufacturing Production rose 2.1% in March, up from 1.3% and easily beating the forecast of 1.0%. The British economy is still some 8.7% smaller than prior to the Covid pandemic, but the March reading is an indication that the economy is headed in the right direction, and that bodes well for the British pound, which has been on an impressive streak. GPB/USD is up 1.13% this week and has soared in May, with gains of 2.34%. The pound avoided a potential pitfall early in the week, as the results of the Scottish election showed that the pro-independence SNP failed to garner a majority in parliament. This means that investors can count on political stability, and the pound responded with gains of close to one per cent on Monday. GBP/USD continues to test resistance at 1.4137, followed by resistance at 1.4269. There are support lines at 1.3859 and 1.3727.
by OANDA
Largest economies in the US and in EuropeI think every one should know what the 4 largest American states and 5 largest European ones are. After the Chicago state I really don't know what the other ones are and I do not think they carry the same weight as the biggest ones, I don't think it's that important to look at what's happening there. In Europe Spain has had huge unemployement and people living with their parents for decades, Italy is sort of on a path of dying like Greece now, the south countries basically are doomed, the ones around central-north Europe (Germany Netherlands Belgium) are still doing very well, France is ok for now, and the central/east Europe ones are on an uptrend still recovering from the USSR and oh boy I was talking to Czechs and Slovaks today and I dared to speak not completely negatively of communism and gosh the reactions it's like going to an Antifa group and praising Hitler. It's not just Hungarian & Polish politicians, the typical population hates communism with a passion and is very skeptical of the European central power. So to sum up I'd divide it like this: The economic gap between Europe North and South is the reason why the Euro is under stress and might have to be changed, OR - and this might be part of the plan - why Europe needs to have even MOAR power over the nations to make the Euro work. Italians do not want to end up like Greeks, there is a possibility that the EU collapses like the USSR. The divide between the US "camp 1" and "camp 2" is the reason why you cannot have shared laws and shared media and so on, or maybe it is a reason for the federal government to tighten its grip? Stubbornness and totally different ideals but also realities means there is a possibility that the US collapses like the USSR. In any case the government securities bagholders will be the greatest fools the world has ever seen. France has been vigorously fighting and spreading propaganda against Sputnik, the Russian vaccine. But oh joy, Germany started to import it. Now is the time we will see if France is Germany counterweight, Europe second power, or if France is a Chihuahua that will follow its master. I already know the answer :) The difference between the EU and the US is the EU has been stagnating for 20 years and will fall from that stagnant point, but they still retained a neutral trade balance and some manufacturing possibilities; whereas the US has been printing magical money and severely net importing to increase their wealth (not just stagnate) WHILE getting lazier and producing relatively less. So they will both fall from much higher and end up much lower. Some states have it worse than others we all have an idea I think? I can't mention the subject without offending the cry babies. You can look at the stats for the EU here on the link below, it goes back to 2002 it's the same story for 20 years just has kept balooning with more net importing from China and more net exporting to the USA. "Unsustainable" they said, now been going on 2 decades, nothing to see here. trade.ec.europa.eu
TVC:SPX
by MrRenev
3
US consumer confidence surges in March to one year highThe consumer confidence index increased to 109.7 in March from 90.4 in February, which beat the economists' forecast at 96.9 Consumers’ assessment of short term outlook on salaries, employment rate and commercial activities increased , with an optimism view on the domestic consumption market MM Analysis The consumer confidence index reached 109.7 in March, which echo with the increased number of University of Michigan Consumer Sentiment Survey. Consumer's optimism derived from 3 main factors. 1. Increased vaccinations, which indicates a rebound on commercial activities 2. Labor market on the mend, i.e. decreasing Unemployment Insurance Weekly Claims, increasing US Non-farm Payrolls, which would boost the retail and personal consumption growth 3. Transfer income from the American Rescue Plan In conclusion, strong consumption confidence and high saving rate would provide a strong support on economic recover, pushing up the US GDP
TVC:DXY
by MacroMicro_Global
Canadian dollar slips to 3-week low, GDP nextThe Canadian dollar has lost ground for a second straight day. Currently, USD/CAD is trading at 1.2634, up 0.35% on the day. Earlier in the day, USD/CAD touched a high of 1.2674, its highest level since March 10th. It's been a quiet start to the week for USD/CAD, with no Canadian events. That will change on Wednesday, with the release of Canada's GDP for January. The street consensus stands at 0.5%, which would be a strong rebound from the lethargic 0.1% gain a month earlier. A figure higher than the estimate would be bullish for the Canadian dollar. We'll also get a look at the Raw Materials Price Index, an important inflation gauge. The index is expected to show a strong gain of 5.3% for February, after a reading of 5.7% a month earlier. This reflects pent-up demand due to the Covid- 19 lockdowns in effect.    US yields are on the march, with the 10-year yield rising to 1.77% on Tuesday, its highest level in 14 months. The rise in yields comes a day before President Biden will announce parts of a proposed new infrastructure plan, Build Back Better, a massive spending program which will carry a price tag of between 3-4 trillion dollars. HSBC sent out a note saying that “stimulus and any infrastructure plan are likely to prove to be a sugar rush for the economy”. Given that such a massive recovery program will trigger higher inflation, we could see bond yields continue to rise this week, which would likely prolong the dollar rally. Biden's massive package will undoubtedly include tax hikes, which is likely to garner strong opposition from the Republicans. USD/CAD is putting pressure on resistance at 1.2641, followed by resistance at 1.2713. On the downside, there is support at 1.2486. Below, there is support level is at 1.2403. This is followed by the 52-week low, at 1.2365
by OANDA
Some of the most notable GDP contractions of recent historyRussia & Ukraine bit the bullet in 2008 and has some decline, and another decline in the mid 2010s (maybe made worse because of droughts?). They recovered by now (the US collapse might pull them down or maybe free them to go up). Even Germany GDP between 2014 and 2015 dropped by 15% (never heard of a great depression) , their GDP now is back to 2014 levels, it took 3-4 years to get back to pre-(undercover) recession levels. France same thing, Turkey, Iran, the UK, Canada... There is 1 exception: the US. Hey George Soros was right shorting it back then but he forgot about brrrrr. China is also an exception but their growth was so big it could absorb the hit, it went from 10% growth to 6%. The US GDP did not drop and growth not even slowdown. The life expectancy in Russia was skyrocketting until 1965, this is when it started to stagnate even decline a bit (it dropped in the US btw they're behind several African countries now). It's ridiculous it went from 24 yo in 1945 (even before the war it was at around 30) to nearly 70 by 1965. No wonder communism lasted so long. Ironically much of the gains were from babies surviving birth but soviets started furiously aborting, so the real life expectancy actually went down... From the fall of the USSR to ~2000 depending on the source the life expectancy dropped by ~5 years. The US life expectancy did not drop since WW1, until 2020. Covid, or foreign dependency? The medications other countries used were not easilly available in the US. What if all their hate for the many treatments 2/3 the entire world outside of the west have been using was just a silly way to avoid saying "yes they work, but we don't have any of these cheap drugs"? The silly restriction rules in Europe, and part of the reason why the death rate was so high, is (officially and when you look at the numbers) a lack of beds. They did not have enough stuff to provide treatment to the sick. I think it's possible the US were in the same situation they dug themselves in over the years. A country collapsing does not mean "stock indice go down", it breaks down in many other ways, and "stonks" can keep going up like the pyramid scheme they are. A grim conclusion There was only 1 superpower left in 1992. Soon there will be 0 left. The standard of living of the west will drop but the US will drop most because they are on life support from the rest of the world (China, Mexico, Germany, and many others de facto send humanitarian aid to the US to keep them fat and rich). The higher you push life expectancy the exponentially harder it is right? And it drops more. Life expectancy in the US is going to drop by 5-10 years. It dropped by 5 years in Russia and it was not as high and Russia was not as broke as the US. A large part of the "problem" is the aging population (that refuses to postpone the age of retirement and ask for even more social welfare). Nature always finds a way... There is euphoria now it seems. Everyone cheers when they get their stimulus checks. They won't be cheering when they die of old age at 70 years old. My call: Less than 10 years before "This was not real socialism".
TVC:DJI
by MrRenev
1
Destiny Calls - The Tribulation & Creative DestructionDisclaimer: This post will be heavy speculation - but let's have some fun. Let's play this fun game as a mental exercise. In no way is any of this financial advice, nor in any way political, nor does it even reflect my opinion. It is just a mental exercise. I fully admit that economics is not my background, so I will be taking a different approach to forecasting this market. I don't post for recognition, to market anything, or for money, or to advertise my position. I post only to develop my own craft, and to discuss openly. I think that the stock market serves two purposes: 1. It's a casino. It's really shiny and gets you really emotional. It splits you into teams - bull and bear, retail and institution, them and us. You might win for a while - a long while, if you're good, but in the end, the house always wins... and you are about to see that - I think. Anyway, it distracts people from the real game. Not played with fun coupons, but with actual money. 2. It's a training ground... for those that are going to run the economy some day. First of all, M1: What happened? www.thestreet.com I think this can be explained in short, by the Fed increasing their leverage. They are increasing their control over assets, while taking on more risk. State of the Economy: GDP/CPI Forecast: GDP Forecast: CPI Forecast: NSCC-2021-801: www.dtcc.com This should be looked into. It looks like the Fed is gearing up for something. Everything seems to align for around March 19: The Fed's Tools: www.investopedia.com - Yield Curve Control (leads to inflation): realinvestmentadvice.com - "Open Market Operations": Basically they can buy Treasury bonds, to manipulate interest rates. - "Influencing Market Perceptions The final tool used by the Fed to affect markets an influence on market perceptions. This tool is a bit more complicated because it rests on the concept of influencing investors' perceptions, which is not an easy task given the transparency of our economy. Practically speaking, this encompasses any sort of public announcement from the Fed regarding the economy." Basically, their final "tool" is to lie! Economics and Game Theory are beautiful. In a vacuum, in economics, actors will always act rationally. In its essence, the market, and the economy, is just one thing paired against another, right? All it is is a game, to see how many of one thing you can exchange for another thing, that the other person owns. That is why Game Theory, Dow Theory, Supply and Demand, and all forms of psychology work in the market. It's really a game of accumulating Debt. G30 Reports on COVID-19: "COVID-19 triggered a historic collapse in peacetime economic activity. Every indicator continues to point to a multiyear crisis with long-lasting repercussions. With extreme poverty, hunger, and deprivation rising for the first time in decades around the world, as many as 100 million more people could be living on less than US$1.90 a day in the wake of the pandemic." "Policymakers need to act urgently, as the solvency crisis is already eroding the underlying strength of the business sector in many countries. The problem is worse than it appears on the surface, as massive liquidity support, and the confusion caused by the unprecedented nature of this crisis, are masking the full extent of the problem, with a “cliff edge” of insolvencies coming in many sectors and jurisdictions as support programs lose funding and existing net worth is eaten up by losses. "The first wave of liquidity-focused policy measures has prevented much more severe consequences for the corporate sector, jobs, and for the economy more broadly. As the crisis progresses, jurisdictions now need to develop policy responses that accommodate structural changes in the economy triggered by the pandemic, and address the following problems that make the initial response unsustainable: - A level of public spending that would be unsustainable over the potential duration of the ongoing economic crisis..." "Some sovereigns, most of them investment-grade, were able to borrow in the international capital markets since February of 2020, but an unprecedented number of countries saw ratings downgrades. No Sub-Saharan African country has borrowed in the international capital markets since February 2020" No Debt, this is not allowed. "We reject the view that the worst of the crisis has passed." "Remaining uncertainty must not become an excuse for inaction." "Advanced economies have responded to uncertainty with domestic measures that match our assessment of the gravity of this crisis. Governments there have found innovative ways to expand central bank balance sheets and run double-digit budget deficits, established multi-trillion dollar facilities to bolster market liquidity and credit flows, and enacted emergency measures to help cash-strapped people and firms, but only at home." "Existing crisis management and debt restructuring institutions are an increasingly poor fit for today’s mix of actors and problems. New creditors—bond holders, China’s policy banks, hybrid and commercial actors represent the bulk of debt payments from low-income countries in the wake of the pandemic shock . Adapting the international financial architecture to these and other new stakeholders will take time. Urgent responses to the pandemic cannot wait for this process to run its course." New actors are accumulating Debt, this is double not allowed. "At this preliminary stage, we have reached consensus on the following recommendations in each of the seven areas: - The International Monetary Fund (IMF) should mobilize global liquidity on a larger scale than ever before in the face of uncertainty, scale up its crisis lending in low-income countries, and use far more of its existing non-concessional resources to mitigate economic fallout from COVID-19. We call on IMF members to commit to two new SDR $500 billion allocations that could be implemented rapidly in response to future shocks or serious economic deterioration. Separately, IMF members should agree on a mechanism for re-allocating existing SDR to the most vulnerable among them. The Fund needs to double its concessional lending capacity, exhausted early in this crisis, to enable it to respond nimbly to large-scale outflows in multiple vulnerable countries. It should signal willingness to use far more of its ample non-concessional resources to support middle-income countries in the face of uncertainty. It means that more debt will be accumulated from emerging nations. - The World Bank Group and the growing array of regional development banks have a critical role to play in preventing the COVID-19 shock from turning into a global humanitarian crisis, fueling inequality and social strife. They need to find creative ways to maximize their concessional “surge” capacity as part of a coherent multilateral framework, avoiding duplication. - “Whether China decides to join the Paris Club, to pursue a complementary forum for some or all of its lenders, or both, we remain convinced of the need to reinforce the long-standing international comparability norm." "Although China has engaged in overseas lending for many decades, it has since the early 2000s gradually become a leading creditor to emerging economies, and remains by far the dominant creditor in some of the most vulnerable among them. Low-income countries’ outstanding debt to China’s government and its state-owned lenders exceeds both bond claims and the claims of Paris Club creditors. While China’s Ex-Im Bank has renegotiated some of its exposure in conjunction with DSSI, projected debt repayments to China also top repayments to traditional bilateral creditors, owing in part to market-based commercial interest rates on loans by China’s policy banks. For many emerging market countries in debt distress, it would be virtually impossible to achieve sustainability without implicating their debt to China. High concentration of exposures in a small number of countries poses an additional challenge. China’s successful integration in the informal sovereign debt restructuring regime would be an investment in the broader regime, and should help it adapt to future changes. To implicate debt - Debt Financing: www.investopedia.com “China can lead by example, joining the Paris Club with respect to its official claims, and restructuring its hybrid and commercial claims in a similarly transparent multilateral forum.” "The prospect of a better-fitting restructuring forum in the future cannot excuse inaction today. Going forward, there is a strong case for a debt restructuring forum where institutions that combine features of official and commercial creditors would coordinate among themselves and with other stakeholders in a sovereign debt restructuring." There will be a restructuring of debt, where official and commercial creditors will coordinate. "Adapting crisis management and debt restructuring institutions to reflect China’s role and those of other new stakeholders is vital, but it will take time. Urgent response to the pandemic cannot wait for the adaptation process to run its course." Will the game be shut down, before it is too late? Sovereign Debt will be an important topic ahead: - "Inadequate sovereign debt and debt restructuring disclosure results in a faulty patchwork of information about direct and contingent claims against sovereigns. Sovereign borrowers should include robust disclosure requirements as part of public debt authorization, including guarantees and other forms of engaging the credit of the central government. Risks associated with formally and informally secured debt and project finance need to be carefully managed. "Sovereign borrowers should establish and publicize robust debt disclosure requirements as part of public debt authorization, including guarantees and other forms of engaging the public credit." “Meaningful disclosure should be a necessary condition for contract enforcement.” "Recent collaboration between international financial institutions and market participants to create and operationalize a platform for debt contract disclosure is a step in the right direction. Information about public debt should be made available on a public platform. Although research institutions and private trade associations may be able to host such information, public debt transparency is simply too important to be left to the vagaries of private finance and the interests of academics. Proposals for contingent sovereign debt instruments have a long history, but have, for the most part, failed to gain acceptance in the sovereign debt markets. Designs such as GDP-indexed bonds sought to move away from the basic structure of fixed rate sovereign bonds, without much success. Researchers at the IMF and at the Bank of England have elaborated multiple design options to suit different economies... GDP-linked instruments have not found a broad market, in part because of concerns that GDP is measured by the issuing government. Commodity linked instruments have the advantage of being priced relative to a global market, and of providing greater relief in the event of most shocks. Commodity prices are typically more volatile than output. To date, though, such instruments have not been used even in cases where there would be obvious advantages to better aligning external debt service to a country’s dominant export proceeds. Venezuela remains in default on its external sovereign bonds, and an oil-linked instrument would clearly align payments to payment capacity. If such options are fundamentally undervalued by the market, they cease to be attractive even in a restructuring case, as creditors may put an extremely high premium on fixed payments that push the burden of managing commodity price volatility entirely on the debtor, absent restructuring or default." “We favor contingency features framed broadly, because it is very hard to predict any given shock with precision: hurricane clauses do not help in a pandemic.” "Broadly written options offer clear advantages to the sovereign borrower and its creditors. Because existing contingency triggers are written narrowly, they insure against a narrow category of risks. Such contracts, by design, do not protect against unforeseen risks. Hurricane bonds do not help in a pandemic, even though the pandemic may end up having a more catastrophic economic impact on tourism-dependent islands. An option that allows the sovereign borrower to defer payments for any reason, for a limited number of times, delivers relief without the cost of default, such as credit ratings downgrades. Creditors avoid the uncertainty and collective action problems that come with renegotiating contractual terms in the event of an unforeseen shock. More powerful contingent instruments would automatically reduce interest payments and defer principal payments in the event of a shock beyond the issuer’s control, whether from hurricanes, earthquakes, or pandemics. They would go beyond providing relatively easy-to-price flow relief, and offer broader downside protection, such as interest forgiveness, in the event of natural disasters. Fear of a credit downgrade and its consequences, well founded and otherwise, can delay necessary debt restructuring, which in turn harms sovereign borrowers’ economic and financial prospects in the medium term. Major credit rating agencies assign default ratings to sovereign debt in the event of failure to pay principal or interest on debt to private creditors, a distressed debt exchange to avoid payment default or unilateral change in payment terms, so long as the new terms reduce the original payment obligation. Although ratings methodology allows for discretion, sovereign borrowers perceive the action as automatic. Some credit rating agencies have put countries on downgrade watch in anticipation of a restructuring. Countries could expect to be upgraded quickly after a restructuring that improved their debt sustainability or debt repayment profile, but not after a restructuring that brought no durable relief. In some cases, changes in sovereign ratings may also raise concerns about financial stability and market liquidity." “Fear of a credit downgrade and its consequences, well founded and otherwise, can delay necessary debt restructuring, which in turn harms sovereign borrowers’ economic and financial prospects.” Is Blockchain coming to sovereign debt instruments? This screams smart contracts, don't you think? The question is... is it Bitcoin? Ethereum? Or IMF's own? I will dive deeper into this below... G30 Core Principles in the reviving the Corporate Sector after COVID-19: - Focus on the long-term health of the corporate sector. The duration of the pandemic forces us to focus on structural issues and solvency, rather than buying time through a focus on liquidity. This also means we need to shift from broad-based to targeted measures, allowing reallocation of resources to occur. Expect trend changes, expect distribution of tech talent. FAANG valuations will fall. Good luck programmers, I hope you enjoyed your boom cycle and invested well. No, LC will not save you this time. - Focus on the most productive use of resources. It is critical at this stage that public policy is geared towards a strong economic recovery. This is one reason for taking advantage of private sector capacities where they exist, in order to leverage scarce public resources and to make use of private sector expertise to evaluate the viability of businesses. This also means that the choice of strategies aimed at achieving other societal objectives, such as greening of the economy or digitalization, should be based on their synergies with the efforts to accelerate the recovery. Finally, the design of any scheme to support the corporate sector should contain the risks of adverse selection, with weaker players seeking to take great advantage of such support. Value will rise. - Act urgently to tackle the growing corporate solvency crisis. This crisis threatens prolonged economic stagnation, and harm for households and workers, if it precipitates a “cliff edge” wave of insolvencies or the creation of masses of zombie firms. Many measures to support the recovery will take time to deliver and should be initiated early. Some nations have already made significant progress in this area. No, these zero revenue, massively overvalued companies are a dime a dozen. The "cliff edge" is already here. Mass insolvencies are coming. - Adapt to the new business realities, rather than trying to preserve the status quo. The business sector that emerges from this crisis should not look exactly like it did before due to permanent effects of the crisis and the pandemic’s acceleration of existing trends such as digitalization. Governments should encourage necessary or desirable business transformations and adjustments in employment. This may require a certain amount of “creative destruction” as some firms shrink or close and new ones open, and as some workers need to move between companies and sectors, with appropriate retraining and transitional assistance. However, even governments that support such adaptation in principle may need to take measures to manage the timing of creative destruction to account for the knock-on effects of excessively rapid shifts, such as for insolvency regimes that could become overwhelmed. The digitalization trend is here to stay, and will only accelerate. The world will be changed. - Market forces should generally be allowed to operate, but governments should intervene to address market failures that create substantial social costs. Some existing market failures are particularly troublesome in the current crisis, such as the longstanding difficulty in funding SMEs effectively. Other market failures are artifacts of this specific crisis, such as the high degree of uncertainty that can deter private investment. And if market failures cannot be addressed? Will it affect sovereign credit risk? www.investopedia.com US sovereign credit rating has been downgraded before: en.wikipedia.org Just like how analysts downgrade stocks to manipulate them, credit analysts can downgrade entire countries! - Private sector expertise should be tapped to optimize resource allocation, where possible. - Carefully balance the combination of broader national objectives with business support measures. - Partnering with the private sector to finance necessary balance sheet restructurings. Government contracts are not going away any time soon, and this is really the new game in town. It also means more nationalization of enterprises. - Policies designed to support broader national objectives such as digitalization, environmental sustainability, or the promotion of new or strategic industries. We note that some of these measures could be incorporated into the targeting or design of responses to the corporate solvency crisis, but do not discuss these in detail. - Responding to the implications for individuals of business failures. By accepting that some firms should be allowed to fail, governments will need to ensure their social safety nets are robust, and provide support for retraining and entrepreneurship. - Limiting government support of businesses to those circumstances where there is a market failure. Many businesses will fail. They know it. Market failure will be the justification. - Investing in equity and quasi-equity of businesses. Now is a time for many businesses to increase the amount of their equity funding and to limit their debt, to give themselves a greater margin for error and to decrease repayment burdens. Governments can get the most “bang for their buck” by encouraging that balance sheet restructuring through incentives for new equity and quasi-equity in these targeted firms or by making such investments themselves. - Infusions of equity or equity-like investments: Policies to make, or encourage the infusion of, equity or equity-like investments in viable firms What can this mean, other than more State control, in exchange for cash infusions? "Where are there market failures with substantial social costs? Identify for different types of firms whether there are sufficiently significant market failures to require interventions, and the barriers to the private sector in resolving them. In addition, identify where the costs of financial distress and the social costs of business failure are substantial." What market failures will have substantial social costs? WHY WE HAVE NOT YET SEEN MAJOR SOLVENCY ISSUES: - Generous government financial support has concealed the scale of the challenge - Temporary adjustments to insolvency regimes have blocked bankruptcies But they already stated that the financial support cannot last. The mass insolvencies are coming. "In addition, several programs to stabilize money market funds and other parts of the financial markets were conceived in the 2008 crisis." More on this later... Game Theory: - COVID-19, the Internet, and its effects on the economy. - COVID-19 addresses many issues from the perspective of macroeconomics. - COVID-19 and China. - COVID-19 as an accelerant for systematic change. New Economy and Reliance on the Internet (Mark on the Forehead): www.investopedia.com - Research has become much easier as technology has made what was scarce, abundant. Open-source research has become prevalent, and an interesting modern phenomenon is retail investors beating out institutional investors, through their open-source styled financial research. www.investopedia.com - It was found that false news spreads 6 times faster than real news. In the future, it will be increasingly valuable to be able to discern quality information from misinformation, as methods of fabrication such as AI powered NLP, gpt-3, Deepfakes, Dynamic Ontologies in data collection & analysis, Mass Psychology and Psychological Analysis Methods, Markov Chains and Hidden Markov Models, Etc. become widespread. Despite this, I think the Internet will propel advancements of technology and scientific knowledge exponentially. This is because at its core, the scientific method is a method that takes ideas, and scrutinizes them, and deposes of what is wrong and keeps what is right and builds on it. This evolutionary method will also be accelerated, but people will need to become much smarter, more attentive to details, and aware of misinformation. news.mit.edu - Technology has become dominant in people's lives as they become more isolated, and many middle class jobs have already been replaced by technology. This is a trend that will likely continue, as in the future economy, there will be more consumers, an aging population, and fewer workers. The best solution to drive the economy is for the workers to become more productive. Technology will enable fewer workers to produce more, and waste less time in doing so. Commuting is a complete waste of time for technical workers, from an economic perspective. - I reiterate that this is heavy speculation, but if this trend is to continue, more and more jobs will be replaced by technology, as software engineers automate their own jobs away, and the wealth inequality will become such that the poor will live in communism, while the rich will live in socialism. Capitalism cannot exist once all the wealth is accumulated, and no more capital can be produced by human beings. - While it has become easy to compare products, as the number of consumer discretionary products has increased, it has changed the method of discerning on our own, with our own intuition, knowledge, and experiences between two products, rather, we compare products with what is shown to us through targeted advertisement, search engine optimizations, market sentiment (e.g. other people’s comments or reviews) – which may or may not be organic. In the future, choice may become an illusion – perhaps it is so even now – as internet giants improve their data collection, suggestion and marketing algorithms. It may be so that we consume, feel, think, or do anything that the algorithms suggest us to. “Big tech trades human futures” – Zuboff, The Age of Surveillance Capitalism. - I think the single most important change in human history, is the development of Artificial Intelligence. I think it exists, not in the sense of a single localized entity, but over the span of the entire Internet, through vast networks of supercomputers, and countless machine learning algorithms, working together. While it is said that AI can only mimic human intelligence, through statistics and linear regression for now - eventually its capabilities will grow through emergent behavior and it will surpass human intelligence. At this stage, I can only say this intuitively, and cannot offer a definite proof. - On the optimistic side, I think that many in my generation understand the existential dangers, and some of whom will be in influential positions in the future. In 5, maybe 10 years from now, I think there will be greater regulations on the Internet, data collection will be illegalized, the freedom of choice on the Internet will become a basic human right, many of the current tech giants will be broken up, and the Internet will first become nationalized, and then, possibly municipalized, or decentralized. Until then, it is possible that we see a period of corporate dominance, and an even greater attempt to influence people through the Internet. This period may be remembered in history as a warning for future generations. - I think that the developer community has an actionable and efficient system in open source, and this system should be scaled and implemented in other sectors. GDP, Economy and Population: When everything has to do with the balance sheet, and hard choices must be made. We have to look at the numbers. www.investopedia.com "GDP is primarily measured based on the expenditure approach. This approach can be calculated using the following formula: GDP = C + G + I + NX (where C=consumption; G=government spending; I=Investment; and NX=net exports)." www.investopedia.com How can GDP equation be ameliorated? - It is simple. Stimulus, and an attractive market for retail investors. "There is a straightforward relationship when identifying the sources of economic growth: Growth Rate of gross domestic product (GDP) = Growth Rate of Population + Growth Rate of GDP per capita, where GDP per capita is simply GDP divided by population." www.investopedia.com How can this equation be manipulated to best increase growth rate of GDP? - Growth Rate of Population is negligible: it is under 1%. - Growth Rate of GDP per capita: This rate varies between 1-5% in the last 5 years. - The division will be the dominating factor in the rate of change. - Raising GDP while lowering population, especially in the higher age bracket will increase Growth Rate of GDP. Of interest: MY Rates: warwick.ac.uk Why focus on these equations? Determinants of Sovereign Credit Ratings: 1. Per capita income 2. GDP growth 3. Rate of inflation 4. External debt 5. Economic development 6. History of defaults corporatefinanceinstitute.com Powell, the Gamma Bubble, and the New Economy: In this idea, I analyzed the current state of the market: Macroprudential tools, AI: www.federalreserve.gov What are macroprudential tools? - Fed, BlackRock & co.'s algorithm has learned how to crash the economy, and how to profit from it. Social media, Politics, and Religion - The Spectacle is becoming more and more captivating. - You don't want to do this, but look up the Mass of the Holy Ghost. - The first test was the presidential election, but this was to see the government and societal response. - What if they could go even further than that? What is something that stirs emotion in people even more than politics? - What if there was a reason that such a Spectacle was needed? GME and BlackRock, Bonds and the Fed: - GME can be seen as a lesson. It is a parable, and we must look deeper. www.forbes.com COMEX, JPMorgan, and the Big 8: - There is not enough silver, nor gold in the COMEX vaults. In short, the fractional reserve banking system has made it such that there are numerous owners for each bullion of the physical! If there is collective action to withdraw the physical, via settlement of paper for physical delivery, COMEX cannot deliver, since there is simply not enough in the vaults! - This is what the whole silver squeeze movement is about. I did analyze it previously: - Major banks are currently exiting from the metals market: www.bullionstar.com What is currency? What is money? - Currency is a medium of exchange for goods and services. In short, it's money, in the form of paper or coins, usually issued by a government and generally accepted at its face value as a method of payment. - Currency is the primary medium of exchange in the modern world, having long ago replaced bartering as a means of trading goods and services. - In the 21st century, a new form of currency has entered the vocabulary, the virtual currency. Virtual currencies such as bitcoins have no physical existence or government backing and are traded and stored in electronic form. - Currency is a generally accepted form of payment, usually issued by a government and circulated within its jurisdiction. - The value of any currency fluctuates constantly in relation to other currencies. The currency exchange market exists as a means of profiting from those fluctuations. - Many countries accept the U.S. dollar for payment, while others peg their currency value directly to the U.S. dollar. - A key characteristic of modern money is that it is uniformly worthless in itself. That is, bills are pieces of paper rather than coins made of gold, silver, or bronze. The concept of using paper as a currency may have been developed in China as early as 1000 BC, but the acceptance of a piece of paper in return for something of real value took a long time to catch on. Modern currencies are issued on paper in various denominations, with fractional issues in the form of coins. Why does money need to be physical, when we already use paper that is inherently worthless for money, which are denominated based on fractional issues of nothing? We have already moved on from the Gold standard! Why the US Dollar is the World Currency: - The 1944 Bretton Woods agreement kickstarted the dollar into its current position. Before then, most countries were on the gold standard. Their governments promised to redeem their currencies for their value in gold upon demand. The world's developed countries met at Bretton Woods, New Hampshire, to peg the exchange rate for all currencies to the U.S. dollar. At that time, the United States held the largest gold reserves. This agreement allowed other countries to back their currencies with dollars rather than gold. - By the early 1970s, countries began demanding gold for the dollars they held. They needed to combat inflation. Rather than allow Fort Knox to be depleted of all its reserves, President Nixon separated the dollar from gold. - The relative strength of the U.S. economy supports the value of the dollar. - By that time, the dollar had already become the world's dominant reserve currency. But, unpegging the dollar from its value in gold created stagflation. - In March 2009, China and Russia called for a new global currency. They wanted the world to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies." - Some governments invest their reserves in foreign currencies. China and Japan deliberately buy the currencies of their main export partners. The United States is the largest export partner in China, and second largest in Japan. They try to keep their currencies cheaper in comparison so their exports are competitively priced. - China was concerned that the trillions it holds in dollars would be worthless if dollar inflation set in. This could happen as a result of increased U.S. deficit spending and printing of U.S. Treasuries to support U.S. debt. China called for the International Monetary Fund to develop a currency to replace the dollar. - In the foreign exchange market, the dollar rules. Around 90% of forex trading involves the U.S. dollar. - Theoretically, any one of them could replace the dollar as the world's currency, but they won't because they aren't as widely traded. www.thebalance.com Stagflation never left. Velocity of Money, Velocity of Circulation, Fintech and High Frequency Trading: The velocity of BTC is increasing, while the velocity of USD is decreasing. charts.woobull.com(This%20is%20the%20equivalent%20to,by%20the%20Bitcoin%20money%20supply.) - Currencies have value because they can be used as a store of value. - Successful currencies have six key attributes—scarcity, divisibility, utility, transportability, durability, and counterfeit-ability. - The cryptocurrency bitcoin has value because it holds up very well when it comes to these six characteristics, although its biggest issue is its status as a store of value. - Bitcoin's utility and transferability are challenged by difficulties surrounding the cryptocurrency storage and exchange spaces. - However, if bitcoin gains scale and captures 15% of the global currency market (assuming all 21 million bitcoins in circulation) the total price per bitcoin would be roughly $514,000. www.investopedia.com - Whenever the interest rate on financial assets is low, the desire to hold money falls as people try to exchange it for other goods or financial assets. As a result, the velocity of circulation rises. Hence, when the money demand is low, the velocity will be high. Conversely, when the opportunity cost/alternate cost is low, money demand is high, and the velocity of circulation is low. - Money Supply – Money supply and the velocity of money are inversely proportional. If the money supply in an economy falls short, then the velocity of money will rise, and vice versa. - Frequency of Transactions – As the number of transactions increases, so does the velocity of circulation. - Regularity of Income – Regularity of income enables people to spend their money more freely, leading to a rise in the velocity of circulation. - Payment System – It is also affected by the frequency with which labor is paid (weekly, monthly, bi-monthly) and how fast the bills for various goods and services are settled. - Several other factors are involved, including the value of money, the volume of trade, credit facilities available in the economy, business conditions, etc. corporatefinanceinstitute.com - HFT is complex algorithmic trading in which large numbers of orders are executed within seconds. - It adds liquidity to the markets and eliminates small bid-ask spreads. - There are two primary criticisms of HFT. The first one is that it allows institutional players to gain an upper hand in trading because they are able to trade in large blocks through the use of algorithms. The second criticism against HFT is that the liquidity produced by this type of trading is momentary. It disappears within seconds, making it impossible for traders to take advantage of it. www.investopedia.com As we saw with Robinhood selling order flow to Citadel, and Citadel being able to perform countless trades in the time between retail pressing "Buy" and seeing the price change, financial algorithms and software will only grow more powerful and faster. Fintech, trading and money is entering a whole new world - with velocity that humans beings can't even detect. The Federal Reserve System, The World Reserve Currency, and Treasury Securities: "Treasury securities are backed by the full faith and credit of the United States, meaning that the government promises to raise money by any legally available means to repay them." en.wikipedia.org Volcker The Giant and The Bretton Woods Agreement: - The Bretton Woods agreement was created in a 1944 conference of all of the World War II Allied nations. It took place in Bretton Woods, New Hampshire. - Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. If a country's currency value became too weak relative to the dollar, the bank would buy up its currency in foreign exchange markets. - Members of the Bretton Woods system agreed to avoid trade wars. For example, they wouldn't lower their currencies strictly to increase trade. But they could regulate their currencies under certain conditions. For example, they could take action if foreign direct investment began to destabilize their economies. They could also adjust their currency values to rebuild after a war . - Until World War I, most countries were on the gold standard. However, they cut the tie to gold so they could print the currency needed to pay for their war costs. This inflow of currency caused hyperinflation, as the supply of money overwhelmed the demand. After the war, countries returned to the safety of the gold standard. - All went well until the Great Depression. After the 1929 stock market crash, investors switched to commodities trading. It drove up the price of gold, resulting in people redeeming their dollars for gold. The Federal Reserve made things worse by defending the nation's gold reserve by raising interest rates. - The Bretton Woods system could not have worked without the IMF. Member countries needed it to bail them out if their currency values got too low. They'd need a kind of global central bank they could borrow from if they needed to adjust their currency's value and didn't have the funds themselves. Otherwise, they would just slap on trade barriers or raise interest rates. - The Bretton Woods countries decided against giving the IMF the power of a global central bank. Instead, they agreed to contribute to a fixed pool of national currencies and gold to be held by the IMF. Each member country of the Bretton Woods system was then entitled to borrow what it needed, within the limits of its contributions. The IMF was also responsible for enforcing the Bretton Woods agreement. But we know that no one would give up power. It means that gold is power. - Paul Volcker was Chair of the Federal Reserve from 1979 to 1987. In 1980, the Volcker Shock raised the fed funds rate to its highest point in history to end double-digit inflation. - Volcker fought greater than 10% annual inflation rates with contractionary monetary policy and courageously raised the fed funds rate to 20% in March 1980. He briefly lowered it in June. When inflation returned, Volcker raised the rate back to 20% in December and kept it above 16% until May 1981. - That extreme and prolonged interest rate rise was called the Volcker Shock. It did end inflation. Unfortunately, it also created the 1981 recession. - Volcker knew he must take dramatic and consistent action for everyone to believe he could tame inflation. President Nixon had contributed to inflation by ending the gold standard in 1973. - The dollar's value plummeted on the foreign exchange markets. That made import prices higher, creating inflation. Nixon tried to stop it with wage-price controls in 1971 that restricted business activity, slowed growth, and created stagflation. - Fed Chair Alfred Hayes tried to fight inflation and recession at the same time as he alternately raised and lowered interest rates. His stop-go monetary policy confused consumers and businesses. In 1972, Congress ended wage-price controls. Worried companies just raised prices to stay ahead of future high-interest rates. Consumers kept buying before prices rose even more. The Fed lost credibility, and inflation rose to double digits. - Thanks to Volcker, central bankers realize the importance of managing inflation expectations . As long as people thought prices would keep rising, they had the incentive to spend now. The added demand drove inflation even higher. Consumers stopped spending when they realized Volcker would end inflation. - The final tool used by the Fed to affect markets an influence on market perceptions. This tool is a bit more complicated because it rests on the concept of influencing investors' perceptions, which is not an easy task given the transparency of our economy. Practically speaking, this encompasses any sort of public announcement from the Fed regarding the economy." Simply put, Fed is lying. www.thebalance.com The IMF, The End of the Bretton Woods Agreement and The Federal Reserve Currency: - The system dissolved between 1968 and 1973. In August 1971, U.S. President Richard Nixon announced the "temporary" suspension of the dollar's convertibility into gold. While the dollar had struggled throughout most of the 1960s within the parity established at Bretton Woods, this crisis marked the breakdown of the system. - Since the collapse of the Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish (except pegging their currency to gold): allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union. Debt is the WB and IMF's currency. www.investopedia.com The New Bretton Woods Agreement: - In 2014, Volcker called for a new Bretton Woods Agreement. The 1944 agreement established the dollar as the global currency tied to its value in gold. Volcker noted that currency crises increased once President Nixon voided the agreement. They include the Latin American, Mexican, and Asian currency crises. - A new agreement would create a coordinated international monetary and financial system that would establish rules to guide world monetary policy. The agreement might include a new global currency to replace the dollar that would create equilibrium in countries' balance of payments. That would ensure they had adequate foreign exchange reserves. - Volcker made these remarks at the Bretton-Woods Committee meeting. It's a group of global leaders seeking cooperation among international financial institutions, including the World Bank and the International Monetary Fund. It also includes the world's central banks, treasuries, and private banks. World Bank Group and IMF. What is a smart contract? "A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible." - Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. - Nick Szabo, an American computer scientist who invented a virtual currency called "Bit Gold" in 1998, defined smart contracts as computerized transaction protocols that execute terms of a contract. - Smart contracts render transactions traceable, transparent, and irreversible. - Smart contracts were first proposed in 1994 by Nick Szabo, an American computer scientist who invented a virtual currency called "Bit Gold" in 1998, fully 10 years before the invention of bitcoin. In fact, Szabo is often rumored to be the real Satoshi Nakamoto, the anonymous inventor of bitcoin, which he has denied. - In his paper, Szabo also proposed the execution of a contract for synthetic assets, such as derivatives and bonds. Szabo wrote: "These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways. Very complex term structures for payments can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures." www.investopedia.com The Birth of Bitcoin, the NSA, and the Fed Fund Rates: - NSA's report on cryptocurrency in 1996: groups.csail.mit.edu - On 18 August 2008, the domain name bitcoin.org was registered. Later that year, on 31 October, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. This paper detailed methods of using a peer-to-peer network to generate what was described as "a system for electronic transactions without relying on trust". On 3 January 2009, the bitcoin network came into existence with Satoshi Nakamoto mining the genesis block of bitcoin (block number 0), which had a reward of 50 bitcoins. Embedded in the coin base of this block was the text: "The Times Jan/03/2009 Chancellor on brink of second bailout for banks." - The text refers to a headline in The Times published on 3 January 2009. This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking. "In addition, several programs to stabilize money market funds and other parts of the financial markets were conceived in the 2008 crisis." IMF and the Need for a Sovereign Debt Restructuring Mechanism: www.imf.org "The absence of a robust legal framework for sovereign debt restructuring generates important costs. Sovereigns with unsustainable debts often wait too long before they seek a restructuring, leaving both their citizens and their creditors worse off. And when sovereigns finally do opt for restructuring, the process is more protracted than it needs to be and less predictable than creditors would like. The international financial system lacks an established framework for restructuring that is equitable across all of the sovereign’s creditors. There are few effective tools to address potential collective action problems that threaten to undermine restructuring agreements acceptable to the debtor and most of its creditors. Holdout creditors may be able to use the threat of litigation to seek to avoid concessions that the majority have agreed to make. All this explains why it is important for the official community, sovereign debtors, and market participants to discuss how to improve the sovereign debt restructuring process. This paper has laid out a possible approach. An international legal framework could be created to allow a qualified majority of the sovereign’s creditors to approve a restructuring agreement, and to make that decision of the majority binding on a minority. The vote would need to include all the relevant creditors of the sovereign, not just the holders of a single debt instrument. Broadening the majority voting process beyond a single debt instrument vastly simplifies the process of creditor coordination, and would facilitate the negotiation of a deal that treats all creditors fairly... Provisions for majority action would be most effective if supported by three other features, all of which protect the debtor’s assets and capacity to pay while it works with its creditors to reach an agreement. The features are: a stay on creditor litigation after the suspension of payments; mechanisms that protect creditor interests during the stay; and the provision of seniority for fresh financing by private creditors. A single body would need to oversee the process of verifying claims and to resolve any disputes. In such a framework, the decision whether to give legal protection for the sovereign and provide seniority for new private financing could to be left to the debtor and a qualified majority of its creditors. Similarly, the sovereign and a qualified majority of creditors would agree on the terms of the ultimate restructuring. The primary purpose of an amendment of the IMF’s Articles would be to provide the statutory legal basis to make an agreement between the debtor and the requisite majority of creditors binding on all relevant creditors." Most well developed corporate rehabilitations laws include the following: (i) a stay on creditor enforcement during the restructuring negotiations; (ii) measures that protect creditor interests during the period of the stay; (iii) mechanisms that facilitate the provision of new financing during the proceedings; and (iv) a provision that binds all relevant creditors to an agreement that has been accepted by a qualified majority. The Benefits and Limits of a Contract: "As has been discussed in earlier sections of this paper, and has been demonstrated in recent cases, collective action clauses include two provisions that can facilitate an orderly restructuring of sovereign indebtedness: (i) a provision that enables a qualified majority of bondholders to bind all bondholders of the same issuance to the terms of a restructuring agreement and (ii) a provision that enables a qualified majority of bondholders to prevent all bondholders of the same issuance from enforcing their claims against the sovereign." US is considering to Restructure Debt, but is at risk of bondholders from simultaneously enforcing their claims. Problem (i): "First, it would be difficult to establish a purely contract based framework." "There is, at the outset, the problem of incentives for the adoption of traditional collective action provisions in all new indebtedness. By definition, a contractual approach would require the sovereign and its creditors to agree to the inclusion of these provisions in all future international sovereign bonds, and also in other debt and debt-like instruments that the market developed. Recent experience demonstrates that sovereign debtors facing financial difficulties actually prefer to exclude such provisions as a way of demonstrating their firm intention to avoid a restructuring. Neither have creditors pressed for their inclusion, notwithstanding the fact that they may make an unavoidable restructuring more prompt and orderly." Smart contracts would eliminate any sort of negotiation tactics. Simply abide, by the contract, or lose your stake. No one can change it. Problem (ii): "Another barrier to the establishment of such a framework is the transitional problem. Even if all new bonds make use of the needed contractual provisions, a large portion of outstanding bonds with long maturities, including bonds governed by New York law, do not contain such provisions." This is the only time to make the transition. Only now will there be justification of a bond market collapse, and a new framework being implemented. Creative destruction. Problem (iii): "Second, even if a contract-based framework could be established, it would not provide a comprehensive and durable solution to collective action problems." Is collective action not democracy? The IMF is proposing a Statutory Framework that "creates the legal basis for majority action across all sovereign indebtedness". What it means is that the IMF will have centralized control over the Debt Restructuring of the US, which seems inevitable. Their final hand is revealed. They state that a contract based approach would have these limitations: - "First, such a provision would exacerbate the incentive problem: if it is difficult to convince a sovereign and the purchasers of one bond issue to agree to the inclusion of a collective action clause in that issue, it would be even more difficult to persuade debtors and creditors to include such provisions in all forms of debt instruments in a uniform manner. Indeed, a sovereign facing financial difficulties would come under pressure from certain creditors to exclude such provisions as a means of giving such creditors effective seniority. Moreover, it can be expected that certain creditor groups would be particularly reluctant to agree voluntarily to an arrangement whereby, for voting purposes, their claims were aggregated with all other present or future creditors. - Second, even if all debt instruments contained identical restructuring texts, which would be difficult to achieve, there would be no assurance of uniform interpretation and application unless they were governed by the same law and subject to the same jurisdiction. In the present environment, emerging market countries that have borrowed heavily often have a variety of bond issuances outstanding which are governed by the laws of different jurisdictions. - Third, it may not be feasible to establish a process by contract that would effectively guarantee the integrity of the voting procedure. Under the statutory framework that governs the domestic insolvency process, a court oversees this process, including the verification of claims, so as to guard against fraud. In the absence of an independent party to verify the true value of claims, a debtor could, for example, inflate its debt stock by establishing matching credit and debt positions with a related party. That entity—which could hold a qualified majority of all debt—could vote to reduce the value of all creditor claims. - Fourth, it is not clear that such provisions would be consistent with the existing legislation of all members. The fact that traditional collective action clauses are not included in international sovereign bonds in some jurisdictions arises, in part, from the absence of a clear statutory basis that allows for the rights of a minority of creditors to be modified without their consent. This issue would be amplified if contractual provisions attempted to aggregate claims for voting purposes. - Finally, and more generally, the financial markets have consistently demonstrated the ability to innovate. A statutory regime is therefore likely to provide a more stable background than contractual provisions even if it were feasible to overcome all of the other difficulties referred to above." Why would it be difficult to convince someone of Debt Restructuring framework? Why would the integrity of a voting process, or uniformity of interpretation be in question? Because there is a middle man. That middle man is human. How can they restructure debt such that debtors and creditors can agree upon a prompt, orderly, and predictable restructuring of unsustainable debt, and all of the IMF's framework's functional requirements be met, while the risks are distributed to debt instrument holders (retail investors)? There is only one clear and actionable solution. It is BLOCKCHAIN! Everything can be solved with Blockchain and Smart Contracts. This is an easy, easy solution. With Blockchain and smart contracts, the IMF itself is unnecessary! There would really be no need for a centralized entity to facilitate Sovereign Debt and Debt Restructuring, when all the details can be agreed upon beforehand by debtor and creditor, with transparency for all to see. The trend of technology has been to remove the middle-man, and smart contracts can indeed eliminate the IMF, and the Federal Reserve System itself. We can all be our own Central Banks. But how can we benefit from this? Will Ethereum be used for sovereign debt? The Highest and Most Pure Forms of Money - Capital, Debt, and Credit: The concept of Bitcoin is nearly economically perfect. With one small change, it is the very definition of Capital, BTC must be paired with Sovereign Debt, and Sovereign Debt must be decentralized and distributed. Then there is no longer any need for a Federal Reserve System. Loans could then be performed through Credit/BTC pair, through smart contracts between individuals, and not through any sort of institution. BTCUSD vs. Fed Funds Rate: What is the meaning of this? Will Bitcoin eventually replace the Federal Reserve System? A Case for Bitcoin: - Bitcoin and Ethereum are maintained and constantly developed by the open-source community. They contribute for free. Why would the Fed want to restart this effort and re-train and pay talented developers when they already contribute for free? That said, the core contributors are not that many. 450~ for Bitcoin apparently. The Million... no Billion dollar question is... Inflation, Stagflation, Deflation? All of them? The order? And Bitcoin, Ethereum, Gold, Silver, Hydrogen, or None of These? - We know that all rates follow the Fed Fund Rates. Mortgage and Student Loans will follow. - It is likely that Deflation will follow Stagflation: www.investopedia.com - Gold forecast: - At first gold will fall, but with the right timing, gold and silver may see astronomical levels. - It is possible that corporate bonds will have a higher credit rating than sovereign bonds, and in the case of deflation, it would be better to invest in high-grade corporate bonds. What Is Stagflation? “Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can also be alternatively defined as a period of inflation combined with a decline in gross domestic product (GDP).” www.investopedia.com - A guess is that stagflation will first come, as the manipulation of economic growth is halted. GDP will decline as government spending decreases, investment decreases as liquidity is withdrawn from markets, and eventually consumption will decrease, as inflation sets in. Net exports will also decrease if the vaccine ecosystem is no longer necessary. War economy is a possible solution. - Economic growth too will slow if population once again begins to increase. In this manner, pandemic recovery will lead to real manipulation-adjusted price discovery. - BTC vs USD, GDP, Debt, Inflation, Fed Fund Rates, Gold: What is Hyper-deflation? www.investopedia.com They key is to see if BTC is the one. Adoption or death. - In this case, a deflationary spiral could follow stagflation, while BTC rises. IMO, I think BTC will have one more harsh bear market, to shake out retail once and for all, and Fed will take over. Why fix what isn't broken? A Case for Gold: - Why introduce the Bretton Woods agreement, when the US had the most gold? Why not return the gold to other countries and instead simply unpeg the dollar from gold at the risk of stagflation? Could it be because gold is still the real currency? I could be completely wrong, I think that normalcy is gone. This situation is real, what awaits is to see if the Fed and other actors can navigate it without incident. However, my intuition tells me that we will see mass insolvencies, and extraordinary market conditions in the nearest future. Too Big To Fail? - We are in a situation where if some things were to happen, it would seem really obvious in hindsight. - US debt: tradingeconomics.com - Why would this be tolerated? THE BLACK SWAN: Will the USA default on their debt? Geopolitical Situation: Game Theory: Who would benefit, if the USA defaulted on their debt? Who owns the most USA debt? Who would benefit from a collapse of the US's creditors? Who would be hurt the least from a spike of US Treasury-tied interest rates? Who would benefit the most from the USD losing the World Reserve Currency status? Who most desires a centralized One World Currency? Who most desires USD no longer being the World Reserve Currency? Who is shorting the US bond market? Could the bond market collapse? Why would this absurd level of debt be tolerated by anyone? Is the USA the only superpower? In a game of brinksmanship, IF the USA does not collapse, who will be blamed for COVID-19? If pandemic reparations are not paid, who will have Casus Belli? Why has the market become more volatile? Why has the wealth inequality increased more than ever in all of history, rather than decrease? Why do policymakers pretend nothing is wrong, when clearly there is? Can you sense desperation? Is an exit scam about to occur? Do harsh economic conditions lead to strong leaders? Do economics lead geopolitics? Do poorly designed treaties lead to a deterioration of international relations? Did Trump succeed in his Trade War? Do economic crises lead to war? Why are nations mobilizing their Military Industrial Complexes, and why are they investing heavily in defense? What happened in the 1920s, what were the conditions like in the Weimar Republic? Have we seen this movie before? www.investopedia.com Are there large banks that may collapse? Are we close to war? Why would war not happen? Is there an easy way out? Why would war be beneficial? Is it better for others to suffer, or you? If there is war, will you lose everything, or will you profit from it? What materials are absolutely essential in a technologically driven, wartime economy? Will war benefit both sides, economically? What is the Occam's Razor, yet the question that is hardest to ask? "People who have little contact with power, who are far from it, always see these things as mysterious and novel. But what I see is not just the superficial things: the power, the flowers, the glory, the applause. I see the bullpens and how people can blow hot and cold. I understand politics on a deeper level." - Xi Jinping Why is Debt Restructuring being Discussed? Could it be that the US is close to defaulting on their debt, and their creditors are not satisfied with current restructuring frameworks? What can be done to avoid war? There are only hard choices left. www.bbc.com The Rothschild Family was established in the 18th century. From what I can read, they were not more exceptional than mathematicians or philosophers in their intellect, but what they did do, was watch the economy... They paid attention, they had a great eye for investments, and they played the macroeconomics game. They may or may not have been the best at it, but they did it for a long time, and they survived and passed down wealth and knowledge for several hundred years, and worked together, eventually mastering statecraft. They largely escaped and survived Nazi Germany... We all know who they are. If you can answer these questions, I encourage you to do so in the comments. I am a strong believer in the open-source movement, or open discussions, and I believe pooling efforts is the key to getting out of this unscathed, and even profiting from it! How to Think different, and be right: a. A different mental model of the world (or “thesis”), relative to everyone else. b. (i) Different and better information on the world than everyone else has. and/or b. (ii) A different and better way of analyzing the same information that everyone else already has. (c) The mental flexibility to abandon our fixed ideas and prejudices, and adapt to the situation as quickly as possible, usually under uncertain conditions. Develop and use your own trade intuition. Not anyone else's! Context is a real language. To put it all together, and make use of this thought exercise, the bottom line is that there are three questions to ask: 1. Gold, Bitcoin, or Other? 2. Stagflation, Deflation, Both, the order? 3. Pandemic, Normalcy, or War? Thanks for reading. GLHF - DPT
FRED:FEDFUNDS
by UnknownUnicorn1043646
8
AUD steady as retail sales hit expectationsThe Australian dollar has recorded slight gains in the Thursday session. Currently, the pair is trading at 0.7790, up 0.23% on the day. Retail sales climbed 0.5% in January, which followed the December gain of 0.6%. These are by no means earth-shattering numbers, but the two consecutive gains are welcome news after back-to-back declines of around 4 per cent. The small gains point to consumer spending stabilizing and with the recovery gaining steam, we can expect better numbers in the coming months.  It has been a busy week on the fundamental side, with a host of Australian indicators. The highlights have been the RBA policy meeting and a strong GDP report. The RBA left interest rates at the ultra-low level of 0.10%, but the rate statement was notable for its reference to the Australian dollar. The statement noted that the bank's current monetary policy had contributed "to a lower exchange rate than otherwise. The central bank has watched with apprehension as the Australian dollar has appreciated sharply against the US dollar, with the Aussie punching above the symbolic 80-line just last week. The RBA would like a lower exchange in order to maintain price stability and protect the critical export sector. GDP showed a strong gain of 3.1% in Q4, down slightly from 3.3% beforehand but well above the estimate of 2.5%. Finance Minister Josh Frydenberg commented that the economy was recovering more quickly than the government had anticipated, noting that the first time in recorded history that Australia has seen two consecutive quarters of economic growth of more than 3%”. Let's review the weekly support and resistance levels: AUD/USD faces resistance at 0.7910, followed by resistance at 0.8116. There is weak support at 0.7752, followed closely by support at 0.7728. The pair is trading around the 0.78 line, which is slightly above its multi-month ascending wedge support at 0.7750.
by OANDA