A destabilized Europe adversely impacts the UK within or without the EU. The UK is tied to Europe in ways that leaving the EU will not sever. Ironically, the UK may find it has less sovereignty if it leaves the EU than within it.
In what can only be seen an unexpected Chinese success, several US allies have agreed to participate in China and India’s Asian Infrastructure Investment Bank. The frustration with the US on this issue is palpable. There is another issue at stake that head of China’s central bank Zhou Xiaochuan made clear at a forum yesterday. On a panel with the IMF’s Lagarde, Zhou pushed for the yuan to be included as a reserve asset and in the SDR basket.
By Frances Coppola I do like sectoral net lending charts. This one is from the OBR’s latest Economic Forecast: The thing to remember about sectoral balances is they must sum to zero. It is not possible to have a negative external balance, as the UK does, with concurrent surpluses in the public, household and corporate sectors. If the UK is […]
As low nominal GDP growth takes hold, we should expect short-term interest rates to remain low and for the yield curve to flatten. There are three main reasons this is so. First, low nominal growth rates imply low inflation. Second, to the degree market volatility produces risk-off sentiment, the bid for safe assets will further suppress yields. And third and most importantly, the natural rate of interest on a zero-day fiat currency liability is zero. I expect that the safe asset class in lowflation currency areas will be dominated by these trends, causing yields to stay low or even shrink. This convergence to zero makes the highest yielding safe assets attractive and thus favours New Zealand and Australia, as well as the the US, UK and Canada to some degree. Comments below
There are no big themes dominating the news today. So it is a perfect time to hit a couple of themes with an economic and market theme approach. Let’s talk banks, Japanese trade, the currency wars and deflation.
This is an abbreviated post from our subscription series at Credit Writedowns Pro. Yesterday, I did a broad overview of four markets of interest to global investors. And I wanted to continue my thoughts on this here with a few more markets and with a deeper dive into some of my thinking about the UK. Britain, Part 2 In the […]
This is the first time I am doing this, so let’s see how much value it adds. I thought I would quickly run through a number of countries in the news and give my perspective on the macro picture in each. I am just going to give a summary here of the key points of interest and will do a deep dive on some at a later date. Let’s start with the US.
Britain faces a crisis of monumental proportions as the Scottish electorate decides whether to leave the Union and make Scotland a fully independent country for the first time since 1707 when it first entered into political union with England. This vote has all sorts of ramifications for the currency, monetary policy, fiscal policy and the banking system within the UK and Scotland. But it also has far-reaching implications for the whole of the EU. I have a few thoughts on how to frame the issue below as well as a model for how to secede if it comes to that.
I don’t have any links today, so I am going to go right into the daily piece here. Just 10 minutes ago, the US jobs numbers were released. Combined with the British composite PMI data earlier, the numbers present a rosy picture for the two economies. If the data continue like this, central bank governors will find it hard to keep the same level of policy accommodation in place.
The economic data out of the US and Spain yesterday were very good and support the idea that both of these economies are seeing recoveries that are accelerating. Some thoughts on the data below
This is an abbreviated post from our subscription series at Credit Writedowns Pro. The European data out today were not particularly good. We saw a deceleration in the eurozone economy, that when combined with the deceleration in German inflation, suggests that deflationary forces could still threaten a debt deflationary impulse in Europe if an exogenous shock hits the economy. The […]
Today’s links carry a widely-diverging set of opinions about the moral issues surrounding the situation in Ukraine. But since this is a finance site, I want to discuss the economic issues. I continue to believe the Ukrainian situation will have only a modest impact on the global economy unless war breaks out. Moreover, Europe’s trade linkages to Russia make sanctions a trickier subject for Europe than the US. Expect to see diverging views within NATO and no meaningful economic penalty as a result.