Quiet markets as the economy enters the end-of-year doldrums and waits, hands-in-pocket, for the Fed's next move. This week we scan the mainstream media for interesting developments - Deutche Bank play their part in the rates hike theatre and the Bank of Ireland joins the…
Quiet markets as the economy enters the end-of-year doldrums and waits, hands-in-pocket, for the Fed’s next move. This week we scan the mainstream media for interesting developments – Deutche Bank play their part in the rates hike theatre and the Bank of Ireland joins the move toward eliminating euro small change.
This post is powered by the Bitcoin Trading Network xbt.social – CCN29 and get 29USD off!
Mon 19 October
China Industrial Production (actual:5.7% expected:6.0% previous:6.1%)
China GDP q/y (actual:6.9% expected:6.8% previous:7.0%)
Tue 20 October
Australia Monetary Policy Minutes
US Building Permits (actual:1.1M expected:1.16M previous:1.16M)
Wed 21 October
Canada BoC Rate Statement
Thu 22 October
US Unemployment Claims (expected:266K previous:255K)
Fri 23 October
France Flash PMI (expected:50.2 previous:50.6)
Germany Flash PMI (expected:51.8 previous:52.3)
Deutche Bank has come right out and said it: the US economy is improving and all is well. If you don’t believe us, then just ask low-wage earners in the US.
In a Bloomberg showpiece Deutche Bank international economist, Torsten Sløk, declares that the US economy is well on the road to recovery. Based on the consumer sentiment data, his analysis opinion is that consumers are optimistic about the future economy and that growth skeptics are stuck in a 2009 mindset.
This is not an economy that is about to enter recession – Torsten Sløk
About slowing productivity and flailing labor force participation, Sløk has the following to say:
This economy is stronger than its reputation and for some reason many investors want to hold onto the 2009 story of “the economy is not good”. We are likely to reach full capacity over the coming 12 months and that is why Yellen, Fischer, and Dudley continue to talk about liftoff in 2015.
Sløk’s analysis data comes from the University of Michigan’s consumer sentiment index. He draws his findings from sentiment data for the bottom third of the income scale who, according to UoM, expect their income to increase over the next year. 50% of respondents express positive expectations for the US economy over the next five years.
However, Sløk does not draw into his argument the fact that the same University of Michigan survey also reveals consumer concern about inflation. Participants expected a 2.6% inflation rate over the next five to ten years – the lowest expectation since 2002. Many remarks by members of the Federal Open Market Committee show concern over “downward pressure” on inflation.
The tone of the upbeat Deutche Bank opinion needs to be contextualized: as a major player in the shadow banking sector, Deutche Bank will, of course, be a key player (along with Goldman Sachs, and others) in the Fed’s Overnight Reverse Repurchase Agreements (ORRA) program. As explored in a previous GEO article, this a covert mechanism for raising interest rates by paying shadow banks and other large lenders to contract available credit.
Receiving rounded change will be voluntary, although a successful trial in an Irish town apparently showed 85% of consumers and 100% of retailers were keen on the scheme. 1 cent and 2 cent coins will remain legal tender and the rounding scheme will only apply to cash payments.
Sweden, Belgium, Denmark, Finland, Hungary, and The Netherlands have already adopted similar rounding schemes.
The Central Bank of Ireland justifies the move with the argument that saving the Irish Mint money ultimately saves the taxpayer money. It explains that a 1 cent coin costs more (1.65 cents) than its face value to manufacture. 2 cent coins are outrageously expensive at 1.94 cents.
Short copper, anyone?
This analysis is provided by xbt.social.
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Last modified: January 10, 2020 2:46 PM UTC