The world economy is in bad shape and it can be worse. Professor Roubini predict a Great depression, not only for 2020, but for the decade of the 2020`s. What does this crisis we`re in really mean? For someone out there it means a great opportunity. It means a great reset.
«The Great Reset» will be the theme of a unique twin summit to be convened by the World Economic Forum in January 2021. In-person and virtual dialogues will address the need for a more fair, sustainable and resilient future, and a new social contract centred on human dignity, social justice and where societal progress does not fall behind economic development.
Founder and Executive Chairman of WEF, Klaus Schwab wrote in his article called «The time for a great reset» that there is a good reason to worry: a sharp economic downturn has already begun, and we could be facing the worst depression since the 1930`s.
But, while this outcome is likely, it is not unavoidable.
Furthermore, Claus wrote this; to achieve a better outcome, the world must act jointly and swiftly to rewamp all aspects of our societies and economies, from education to social contracts and working conditions.
Every country, from the United States to China, must participate, and every industry, from oil and gas to tech, must be transformed. In short, we need a «Great Reset» of capitalism.
The crisis we`re in, together with COVID-19, will deepen and leave the world even less sustainable, less equal, and more fragile. Incremental measures and ad hoc fixes will not suffice to prevent this scenario. We must build entirely new foundations for our economic and social systems.
Managing Director at IMF, Kristalina Georgieva also had the headline «The Great Reset» a few weeks ago. My thanks to His Royal Highness the Prince of Wales and th Professor Schwab for bringing us together, she wrote in the opening.
Furthermore, she wrote this in her article: Now is the time to think of what history would say about this crisis. And now is the time for all of us to define our own role. Will historians look back and say this was the moment of a Great Reversal? Today, we see very worrying signs.
One hundred and seventy countries are going to finish this year with a smaller economy than at the start of the year, and we already project that there will be more debt, bigger deficits, and more unemployment. And there is a very high risk of more inequality and more poverty.
Unless we act.
So, what would it take for historians to look back at this crisis as the moment of Great Reset?
From the persepective of the IMF, we have seen a massive injection of fiscal stimulus to help countries deal with this crisis, and to shift gears for growth to return. It is of paramount important that this growth should lead to a greener, smarter, fairer world in the future, Kristalina Georgieva wrote.
IMF and WEF see some tremendous opportunities. Heh… It seems like a New World Order is on the way…..
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
The IMF (International Monetary Fund) predicted the U.S economy would grow only 2,5% in 2015, and that`s down from their previous prediction at 3,1%. IMF urged the Fed (The Federal Reserve) to wait until first half of next year to start raising short-term interest rates.
The U.S central bank has kept its key benchmark rate at a record low near zero since December 2008, and the IMF said the Fed should wait for more signs of improvement. What they will look for is «greater signs of wage or price inflation».
IMF Managing Director Christine Lagarde said «The economy would be better off with a rate hike in early 2016», and Fed Chair Janet L. Yellen said she expects to begin raising rates by the end of the year, while some economist speculate that the Fed will start raising rates in September. They both know much better than me that deflation is more dangerous than inflation, and deflation is what they are fighting against and not inflation.
Many are bullish on bank stocks.
The KBW Bank Index is up 0,86% right now. Trading at 77,96 which is up 0,66 points. That`s much better than the bottom at 18,62 on March 6, 2009, but down since the top at 118,06 on May 18, 2007.
Technically speaking, the index is breaking the resistance, and the bank stocks are increasing, while the precious metal is declining. Gold is still in a bearish territory and the price is still below $1,200 an ounce.
What`s going on? Higher rates is good for the banks because they can charge more for loans and earn more because of bigger profits on the spreads between loan rates and deposits. Buoyant outlook for the U.S economy in the second half of 2015, and the expected interest rate hikes blows up the banking index.
In the predictions for 2015 I talked about the interest rate to start to increase in 15 – 18 months, and that should be next year. I also talked about how it will start, and it is predicted to see that the rates will go up slowly.
Banks will benefit from a stronger economy and higher interest rates. The legendary investor Warren Buffett seems to see something in the banks earnings, which reflects more than their current stock valuations.
Warren Buffet and his company Berkshire Hathaway (BRK-A) has added much more to its holdings of Wells Fargo (WFC) and U.S Bancorp (USB), and the banks seems to have taken its reputation back since the financial scandals a few years ago.
Citibank is upgraded to buy by Goldman and the New York-based firm is showing progress in increasing earnings and returning capital to shareholders. Citibank is the only firm in the KBW index that is trading below tangible book value, but that will probably end soon.
Investors are keeping a close eye on bank stocks, especially money center banks, since the Fed has indicated a rise in the interest rate. Their key focus is Bank of America, because they will earn on the rise in interest rates.
If the rates increase 1% it is estimated that Bank of America will increase their earning by a whopping 20%.
Rising dollar means a strong economy, and stronger dollar and rising interest rates is bearish for gold, but the precious metal can go up in a rising interest rate environment, but only if an inflation problem is implied by the rise in yields.
To measure that, you can look at the spread between inflation protected U.S Treasury bonds (TIPS) and unprotected long-termbonds (TLT). The rise in yields (drop in T bonds) is due to rising concerns about inflation.
280,000 new jobs was added and that was better than expected (estimate of 226,000) in May, which created a steeper yield curve. Long-term interest rates increased more than short-term interest rates.
Rising bank stocks are signaling economic recovery.
Bank stocks are increasing because they earn money. If not, a flattering yield curve would squeeze bank net interest margins and profits, and investors would run from the banks.
IMF and the Fed said that they don`t know when to rise the interest rate. They will wait for the coming data and so should you.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.
Greece is in trouble, and tomorrow is the day were many things can happen. The media has talked about the debt in Greece for a long time now, and the media tells you that Greece has a $339 million payment due to the IMF tomorrow.
But what if they don`t have money?
The Finance Minister in Greece, Yanis Varoufakis has pointed out that they will not pay if a restructured deal can`t be reached with their creditors. What is this Greek debt drama compared to a San Andreas earthquake disaster movie? Have a look at the film below. It is the European Debt crisis visualized.
The Greek civilization is considered by historians as the first one in the history of mankind. It was a highly developed community, and their lifestyle and inventions indicated a high sense of order and aesthetics.
The ancient Greeks were very keen on sports. The great athletic contest called the Olympic games (OL) began in 776 BC, which marked the beginning of the rise of the Greek civilization. The government was usually unstable due to the tyranny of the aristocrats.
I have been in Greece once and it is a beautiful country. The ancient age of Greek civilization saw the birth of great philosophers like Pluto, Socrates, and the great emperor, Alexander. War with other civilizations began in 490 BC, and now they are in trouble again. Money trouble. They have a huge debt, and need to pay their lenders.
If they pay, they will not be in heaven for a long time, because this will be followed by another 1,2 billion euro debt payment over the next two weeks. In addition; Greek finance ministers have already said that they will not pay these payment without restructuring its debt either.
But it will not stop here. The final Greek drama will probably play out until July, so don`t open your champagne yet. More drama is yet to come.
Greece`s Prime Minister Alexis Tsipras said early this morning after late-night talks with senior EU Official that they were close to a deal with their creditors and that Athens would make a payment due to IMF tomorrow.
Some have said creditors and left-wing Greek government had drafted their own, different, version of a possible accord. Facing bankruptcy, Tsipras` government has been resisting creditors` demand for bigger cuts in pension payments and bigger sales tax increases to generate higher budget surpluses before interest payments that would let it to pay off debts.
I`m not so worried about IMF, because missing a payment is not a big deal in global financial circles. Many creditors have waited with their payments to IMF like Cuba, Honduras and Sudan to name a few.
But if they don`t pay to the ECB later on this summer, then you have to wake up! Central bankers can be very unfriendly if they don`t pay their 3,5 billion euro debt payment it owes the European Central Bank. Watch out for that.
In addition; ECB will stop its emergency lending to Greek banks, and that is a $88 billion dollar lifeline that is keeping them alive right now. People know all that, and that`s why they pulled 800 million euro out of Greek banks a few days ago.
Government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. Greece recorded a Government Debt to GDP of 177,10 percent in 2014, and that`s all time high.
To put this in perspective: Japan`s debt to GDP is 227,20. USA; 101,53. Euro Area; 91,90. Spain; 97,7. Italy; 132,10. UK; 89,4. Cyprus; 107,5. Ireland; 109,7. Portugal; 130,2. Singapore; 105,5. Lebanon; 145,9.
Libya; 6,10!
I`m not worried about Greece in the short term because they have a lot of values in their balance sheet, which means it will take some time before the real big test is coming. The debt is sustainable, because their debt cost is estimated to 2,6% of GDP, so what is the justification for writing down Greece`s debt? The problem is not the debt, but the Eurozone`s bailout condition. Money is almost free and the (nominal) interest rates are low, and no principal is due until 2022.
EU`s fiscal compact, which requires governments with debts of more than 60% of GDP to reduce the excess by one twentieth a year makes it more difficult, and that`s a tall order with Greece`s debt wich is 177,10% of GDP. What they need is less restrictive bailout conditions and relaxation of the fiscal compact rules.
Prime Minister Alexis Tsipras wrote an open letter to the German people, published in Handelsblatt on January 13, 2015;
In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity. In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the ‘extend and pretend’ tactic would lead my country to a tragic state. That instead of Greece’s stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself. My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.
You can wrap $1 bills around the earth 1,471 times with Greece`s debt amount. The unempoyment rate is still high at 25,6%, and the depression will continue.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.
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