On the Nature of Things | Forum

noddy wrote:i always use the self checkout if available, my quirk is buying local brands in preference to overseas or generic ones.

More than $36bn of corporate bonds with a short-term maturity currently trade with a sub-zero yield as the European Central Bank starts buying debt sold by companies next week.

In the wake of the ECB announcing this policy shift back in March, eurozone corporate bond yields have fallen while debt sales from companies have accelerated.

Canada represents, in some ways, the antithesis of the historical government budgetary response as experienced in Australia. While Canada isn’t at zero rates, the target of 0.5% offers a realistic target for the RBA over the next two years, especially if commodities find a new low or China has a real misstep. Interesting parallels can be drawn from their experience, given that they are a very similar country in a number of ways, including their reliance on commodity markets for growth.

Canada cut rates in late 2008 with the rest of the world to 0.5% just as Lehman went under and oil prices briefly traded at $40. Immediately after this the current account deficit moved from being in surplus to deficit and hasn’t recovered since. Most of this is attributable to oil prices cratering of course, but this happened to Australia too. The Canadians are in a far better situation than Australia though, and it’s a result of restraint in the past rather than any choices available to Canada today.

The key difference was that Canada didn’t borrow against the windfall given by rising commodity prices through the strong days in the 2000s, choosing to take the income gains from rising commodity prices and become a creditor to the rest of the world. As a result while Australia owes the rest of the world debts totalling 67% of GDP, Canada is in a situation where the world owes them 15% of GDP and not the other way around. This saving has meant that they are in a far better position to weather a large downturn in commodity prices while the rest of the economy rebalances away from the positive income effect from the temporary boom.

The biggest problem surrounding the central banks’ monetary policies revolves around the corporations that have seen their share prices skyrocket in the years after the recession. As of June 1, 2016, the Standard and Poor’s 500 Index (S&P500) has appreciated by 33% from its 2007 peak; however, much of this growth has been artificial, which is a result of financial engineering in the form of stock buybacks and dividend increases. In 2015, business debt, minus off-balance-sheet liabilities, had increased to $793 billion, with the majority of that money being allocated to financial operations and less than 12% going to actual private domestic investment.

This presents a big problem to the U.S. economy. When business debt is appropriated to financial engineering, it does not develop an income stream to honor interest and repayment requirements. Such debt usage fails to support productivity growth, employment, higher wages or economic growth. Due to this, the economy weakens as debt grows.

Typhoon wrote:FT | Bill Gross warns over $10tn negative-yield bond pile

"A supernova waiting to explode."

Zack Morris wrote:

Typhoon wrote:FT | Bill Gross warns over $10tn negative-yield bond pile

"A supernova waiting to explode."

Zack Morris wrote:Nobody knows what's going to happen,

Zack Morris wrote: least of all Bill Gross whose money-making talents evaporated a few years ago at the same coincidental time that most old-school money managers became irrelevant.

Typhoon wrote:

Zack Morris wrote:

Typhoon wrote:FT | Bill Gross warns over $10tn negative-yield bond pile

"A supernova waiting to explode."

Zack Morris wrote:Nobody knows what's going to happen,

You're probably right about this part, as negative yields are terra incognita.

Zack Morris wrote: least of all Bill Gross whose money-making talents evaporated a few years ago at the same coincidental time that most old-school money managers became irrelevant.

Do you have evidence or is this yet another unsupported assertion?

Zack Morris wrote:

Typhoon wrote:

Zack Morris wrote:

Typhoon wrote:FT | Bill Gross warns over $10tn negative-yield bond pile

"A supernova waiting to explode."

Zack Morris wrote:Nobody knows what's going to happen,

You're probably right about this part, as negative yields are terra incognita.

Zack Morris wrote: least of all Bill Gross whose money-making talents evaporated a few years ago at the same coincidental time that most old-school money managers became irrelevant.

Do you have evidence or is this yet another unsupported assertion?

Gross's portfolio performance has been disastrous the past few years. That's partly why the company he founded fired his ass.

YMix wrote:It looks like a "who can slap the biggest fine" war. The EU went after Google and Apple, while the USA retaliated against Volkswagen and Deutsche Bank.

Introduction

This paper assesses the macroeconomic consequences of presidential candidate Donald Trump’s proposed economic policies. These include his policies on taxes and government spending, immigration, and international trade....

Conclusion

Presidential candidates often put forward proposals that are as much political statements as firm policy positions. No one expects that their proposals will get through the legislative process and into law fully intact. But while the policy proposals put forward by candidates are generally well overstated, they are a statement on their philosophy and priorities.

Mr. Trump’s economic policy proposals should be considered through this lens. He has suggested that he might be willing to bend his position on taxes and perhaps tariffs. He has even intimated that his policy statements are simply a negotiating stance— he is asking for a lot more up front than he ultimately expects to get.

Having said this, what he is asking for is fiscally unsound. His tax and spending proposals will result in very large deficits and a much higher debt load. A future Congress may be able to rein in this profligacy, but it will not be easy, as there is a gulf between what he says he wants on taxes and spending and what it will take to make the budget arithmetic work.

He is also very suspicious of globalization. His willingness to threaten higher tariffs on U.S. trading partners and his sharp criticism of major trade deals signal a reversal on the long-running expansion of U.S. trade and foreign investment. Requiring millions of undocumented immigrants to leave the country also signals less openness to the rest of the world.

The upshot of Mr. Trump’s economic policy positions under almost any scenario is that the U.S. economy will be more isolated and diminished.

.
.. number of Americans not in the labor force has increased by 14,573,000, 18.09%, since January 2009, when Barack Obama became president of the U.S.

In December, according to the Labor Department’s Bureau of Labor Statistics, a record 95,102,000 Americans were not in the labor force, or 47,000 more than in November, and the labor force participation rate was 62.7%, a tenth of a point higher than in November.

The participation rate dropped to a 38-year low of 62.4% on Obama's watch, in September 2015. It was only 3-tenths of a point higher than that of the prior month.

Those who are no longer looking for work, so-called discouraged workers, are not counted in the official unemployment statistics, according to the BLS.

.

SIGN 1: TIGHTENING MONETARY POLICY
SIGN 2: INVERTED AND FLATTENING YIELD CURVES
SIGN 3: SOVEREIGN AND CORPORATE DEFAULTS
SIGN 4: FALLING CONFIDENCE AND CREDIT DOWNGRADES
SIGN 5: EMERGING CHINESE CREDIT CRISIS
SIGN 6: SIGNIFICANT GROWTH IN VALUE OF CRYPTO CURRENCIES
SIGN 7: DISCREDITED AUSTRALIAN FISCAL AND MONETARY POLICY