Zombie Squad

Global Debt Time Bomb explodes soon
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Author:  MPMalloy [ Thu Nov 23, 2017 12:05 pm ]
Post subject:  Re: Global Debt Time Bomb explodes soon

China needs to get a grip & quick!

Author:  MPMalloy [ Fri Nov 24, 2017 3:29 pm ]
Post subject:  Re: Global Debt Time Bomb explodes soon

MEXICO CITY (Reuters) - Mexico’s economy contracted more than previously thought in the third quarter due to the impact from storms and quakes on the oil and tourism industries, the government said on Friday, adding to concerns that stalled NAFTA talks are hurting growth.

Author:  MPMalloy [ Thu Nov 30, 2017 6:28 am ]
Post subject:  Re: Global Debt Time Bomb explodes soon

From CNBC: Yellen: $20 trillion national debt 'should keep people awake at night'
Yellen: $20 trillion national debt 'should keep people awake at night'

Federal Reserve Chair Janet Yellen said also is concerned over the surging level of public debt.

The total national debt level is $20.6 trillion and rising. Of that total, $14.9 trillion is owed by the public.

BY Jeff Cox | @JeffCoxCNBCcom CNBC.com

With Congress wrestling over a tax reform plan that critics say would explode the government budget deficit, Federal Reserve Chair Janet Yellen said she also is concerned over the surging level of public debt.

A Senate committee passed the GOP-sponsored proposal, which would slash the corporate tax rate and lower individual income rates for many Americans.

However, the price tag of the plan is in the area of $1.5 trillion at a time when the Congressional Budget Official already is projecting a deficit of more than $1 trillion in the years ahead and with the total debt level at $20.6 trillion and rising. Of that total, $14.9 trillion is owed by the public.

The Trump administration contends that the lower tax rates would pay for themselves through growth. In her semiannual testimony before Congress, Yellen was asked about a proposal that would trigger tax hikes if economic goals are not met.

The central bank chief did not specifically comment on the trigger plan but said Congress is right to be thinking about the future of the national debt.

"I would simply say that I am very worried about the sustainability of the U.S. debt trajectory," Yellen said. "Our current debt-to-GDP ratio of about 75 percent is not frightening but it's also not low."

"It's the type of thing that should keep people awake at night," she added.

The Fed has critics of its own, though, who say that the central bank helped balloon the debt through low interest rates kept in place since the financial crisis. The Fed kept its benchmark rate anchored near-zero for seven years, from December 2008 through December 2015. During that time, the national debt grew 77 percent.

Under Yellen, the Fed has hiked rates four times and begun to slowly shrink its $4.5 trillion balance sheet.

During her testimony, Yellen told Congress that she would like the Fed to continue raise rates in a gradual manner until it reaches a point where it feels rates are "neutral," or neither stimulative nor restrictive to growth.

Author:  MPMalloy [ Tue Feb 06, 2018 8:13 pm ]
Post subject:  Re: Global Debt Time Bomb explodes soon

From ABC (Australia): Why global markets are in free-fall
By business editor Ian Verrender

It was always going to be a tough ask. How to remove all that stimulus, all those trillions of freshly minted dollars in emergency money from an economy, without causing conniptions on financial markets?

The shake-out on global stock markets is long overdue.

Despite an economy struggling to raise itself off the mat, American investors pushed Wall Street to record levels in 2013 and then doggedly higher, thanks to radical steps by the US Federal Reserve.

Not only did it cut interest rates to zero, to ward off the worst effects of the global financial crisis, it engaged in three long bouts of money printing, pumping more than $US3 trillion into the financial system.

Europe and Japan followed suit while China embarked on a debt spree of unrivalled proportions.

Much of that extra cash, around $US20 trillion, flooded into stock and bond markets, inflating values and distorting returns.

Along the way, investors threw aside every traditional measure of value.

Until last week, Wall Street was collectively valued at more than 25 times earnings. Normally it is around 15 to 16.

It had gone for an unprecedented 312-day run without a 5 per cent pullback. Normally, there are three a year.

The party had to come to an end at some stage, and it appears that happened last week.

Dow Jones has had worse days

You may have panicked when you heard about the massive fall on the Dow Jones, but this isn't the worst we've seen.

The spectre of rising interest rates has been hovering above Wall Street and global markets for months, even as investors pushed the Dow Jones Industrial Average forever higher.

Federal Reserve chairman Janet Yellen let slip at her final outing last week that, with the American economic recovery gathering pace, rates may rise a little quicker than expected.

On Friday, the good news finally arrived. Not only were US jobs figures better than expected, but wages were growing.

That sent shivers through the market as it finally dawned on punters that the era of emergency interest rates was rapidly coming to an end.

High risk stocks, many of them hugely overvalued, were ripe for a fall.

How will this affect us?

Unlike Wall Street, which until last week sat about 88 per cent higher than its 2007 peak, our market has never managed to even get close to breaching record levels.

As of today, we still remain about 12 per cent below our 2007 peak.

Unlike Wall Street's lofty valuations, companies listed on the Australian Securities Exchange are trading at about 16 times earnings, not far off long-term averages.

Partly that's because Australia never jumped on board the money printing train.

And while we blissfully chugged through the worst of the global financial meltdown a decade ago, our economy since has run out of puff.

What spare cash Australians did scrape together when the Reserve Bank slashed interest rates to record levels, we plunged into real estate.

But that doesn't mean we won't feel the impact.

As a major trading nation, exporting food and raw materials to the rest of the world, we are hugely exposed to any change in the global economic momentum.

Any major downturn on global markets affect Australia, as we've witnessed in recent days.

Not only that, our superannuation funds over the years have poured almost half the $2.5 trillion they have under management into Australian stocks.

A large chunk of the remainder is invested on global markets, with Wall Street and Europe accounting for most.

Why do market movements matter anyway?

Stock markets tend to grind higher, sometimes for years on end, before suddenly falling in a heap.

That's because they are driven by two competing forces: greed and fear.

Economists assume that individuals always act rationally, that we always act in our own best interests. There's an element of truth to that.

But they forget about that great wildcard in the human condition: emotion.

Never is that more apparent when it comes to money.

As soon as a market in almost anything starts rising — from tulips to stocks and even an arcane and mysterious concept like Bitcoin — we all want a slice of the action, even if we have little or no understanding of it.

Then, when values start to decline, everyone decides to get out, pretty much at the same time.

Market outlook for 2018

With most major share markets around the world busting through record highs, is 2018 shaping up for a big sell-off?

If enough people are burnt, and end up nursing losses, that makes them poorer which means they spend less.

That's when governments and the Reserve Bank become concerned.

Less spending means lower profits and, if it continues, job losses.

That's the reason why central banks from Washington to London and Beijing to Tokyo went overboard with economic stimulus a decade ago during the crisis.

In doing so, however, they merely laid the ground for the next crisis.

What's likely to happen now?

A healthy and much needed correction? Or the start of a major crash?

They are the questions on everyone's lips.

No-one knows the answer.

Wall Street has risen 40 per cent since Donald Trump was elected President, and gone an unprecedented 312 trading days without a significant pullback based primarily on the misplaced assumption that his low taxing, big spending plans would stimulate growth.

While they certainly would boost growth, they may also fuel a big rise in inflation just as wages are starting to take off. That could prompt the new US Federal Reserve chairman Jerome Powell to push rates higher at a much quicker pace than previously thought. And that would be a big wake-up call to Wall Street.

What happens next depends on central banks. If Mr Powell, a Trump appointee, decides to hold back on rate rises, in order to protect market investors and keep his boss happy, he may merely be delaying the inevitable.

If the global economy is ever to make a full recovery and allow interest rates to return to normal, the frothy markets they have created have to readjust, painful as that will be.

Author:  Stercutus [ Tue Feb 06, 2018 8:56 pm ]
Post subject:  Re: Global Debt Time Bomb explodes soon

Steep market decline at "maybe... we might raise rates..."

Author:  raptor [ Wed Feb 07, 2018 11:37 am ]
Post subject:  Re: Global Debt Time Bomb explodes soon

The Fed announced the likelihood of rate hikes in 2018 back in 2017.

The market in Dec/Jan was and still is reacting to the tax cuts which will improve financial performance in 2018 and beyond. These last blips are simply the market correcting it recent steep increases.

IMO it is a sign of a more normal market. Volatility is a sign of a more normal market.

IMO the market has built in 3 Fed rate hikes in 2018.

Michael Pearce, senior U.S. economist at Capital Economics, agreed, saying the signal of a March rate hike can be small, even just a change in tone.

“It doesn’t need to be much,” he said.

The Fed doesn’t have to bang its shoe on the table because the market already thinks a hike at the March 20-21 meeting is a done deal, economists said.

For the last month, expectation of a March rate hikes “have been a one way bet, with the street grinding expectations higher,” said Pearce.

https://www.marketwatch.com/story/fed-t ... 2018-01-26

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