Category Archives: CENTRAL BANKS

TIME FOR GOLDWATCHERS TO FOLLOW KEYNES

Sound motivation, good timing, good  strategies and reliable current information are essential for all investment decisions. Gold is no exception.

My new book on Gold is scheduled for publication about Easter next year.  There will be no  time to post comments on this blog until the manuscript has been edited and finalised.

 My suggestions for now are to  follow two of the late Maynard Keynes’s pithy suggestions:

1: Successful investing is anticipating the anticipations of others.

 2: When the facts  change I change my mind. What do you do Sir ? 

Goldwatcher 8th October comment re-posted:

Keynes on The Economic Consequences of the Peace:

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

“By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.”

 

 Chart £ – $

Chart of exchange rate values over time

If you have found  information in this blog useful please make a donation  to

THE BRITISH  RED CROSS SYRIA APPEAL

GOLD AND AN AMERICAN NIGHTMARE

Picture credit Boomberg

#CONTENT ADDED 11th NOVEMBER 2016

President elect Donald Trump has spoken to the nation shortly after winning a bitterly contested campaign. His message included a call for binding up campaign wounds, national unity and even a tribute to Hilary Clinton, the lady he was going to jail,  for her outstanding service to the nation.

Trump’s victory is testament to his ability to get things done. With the election having brought Republican control to both Houses of Congress he will be free of politics blocking his plans for economic growth if his p[ans make sense. 

It will be a while before we have any real light  from the Trump administration on  what his plans actually are, if they make sense and what consequences to expect for the US and Global economies .

 Gold remains on the agenda for investors.

 11th November 2016 Goldwatcher comment follows:

 Will the American Dream survive the Clinton Trump Presidential election?  Whoever is elected we expect the time honoured response “THE KING IS DEAD LONG LIVE THE KING” will  accompany any transition of power after the election.

But what about the world monetary system dominated by the US dollar?

 If the world monetary system is challenged by a  loss of faith in the new U.S. President there is no other national currency that will fill the void following  a loss of faith in the dollar. If the American Dream becomes a  Nightmare  gold will again be of utility to investors hedging against  currency risks – as it has already been this year for investors in the United Kingdom following the plunge in the value of the £ sterling that followed the Brexit upset.

As I have written for this blog  before and since the beginning of this year, for Investor Literacy.com and in a long series of Tweets  gold belongs on the agenda for investors when decisions are being made on asset allocation and on hedging against currency risks.

 

THIS WEBSITE IS NOT ADVISORY.  MATERIAL PUBLISHED IS NOT INTENDED AS INVESTMENT ADVICE AND MAY NOT BE USED AS INVESTMENT ADVICE.

PLEASE LINK TO & READ OUR DISCLAIMER ON INVESTMENT ADVICE

 

 

If you find  information in this blog useful please make a donation  to

THE BRITISH  RED CROSS SYRIA APPEAL

 

 

 

.

 

 

 

UK 1% INFLATION RISE – THE TIP OF AN INFLATIONARY ICEBERG

Commenting on the latest UK inflation figures Dr Andrew Sentance,senior economic adviser at PwC, and former Bank of England Monetary Policy Committee member said:

“Inflation has risen to 1.0 percent this month, as expected. Higher import prices are feeding through to consumers because of the fall in sterling since the EU referendum vote. This latest rise, however, is just the tip of the inflationary iceberg which is coming our way. Since the beginning of September, sterling has fallen a further 8 percent or so against the euro and the dollar. This will continue to push up inflation in the months ahead. A stronger oil price will add further to price rises for energy and transport.

“Over the course of next year, we should expect inflation to rise above the Bank of England’s 2 percent target. This will squeeze household spending power and add to the slowdown in the economy in 2017. PwC is forecasting a slowdown in growth to around 1% next year, with investment cutbacks reinforcing the slowdown in consumer spending.”

LINK TO PwC PRESSROOM

 

 

RAY DALIO : CENTRAL BANKERS RISK PUSHING ON A STRING

# Note added 1st February 2016 :

Link to Investor Literacy comment on $5.5 Trillion Government Bonds with negative yield and notes on negative interest rates

INTRODUCTION:

Ray Dalio, billionaire founder and head of Bridgewater Associates,  one of the world’s most successful money managers, consistently makes the case for investors to own gold as protection against adverse outcomes with other investments. His view is unambiguous:

“If you don’t own gold…there is no sensible reason other than you don’t know history or you don’t know the economics of it…”

The above chart accompanies The Economist article “Falling Off The Supercycle – Trapped In A World Of High Debt, Low Rates and Slow Growth.”

The Economist  cite BCA Research as having defined the debt supercycle  as” the period since the Second World War  in which debt levels have inched persistently higher and notes “BCA now thinks the Debt Supercycle has come to an end. This is not because the overall level of debt has fallen; indeed, if one excludes the financial sector, the global level is still rising (see above chart)… monetary policy has failed to create a credit boom in the private sector, even with the help of zero short-term interest rates.”

As early as 2013 BCA commented  :  “The Supercycle reached an important inflection point in the recent economic and financial meltdown with authorities reaching the limit of their ability to get consumers to take on more leverage.  This forced the government to leverage itself up instead. Once fiscal policy is pushed to the limits of sustainability, the debt Supercycle could come to a violent end.”

 RAY DALIO  ON CENTRAL BANKS RISK PUSHING ON STRING

 In an article published in  the Financial Times last week titled Pay Attention To The Long term Debt Cycle and  headlined limits to spending growth financed by debt and money raises risks of policy makers  pushing on a string Dalio writes:

“I have a controversial view that is based on my alternative economic template, and I feel a responsibility to share at this precarious time.

 “In brief, the Federal Reserve’s template, and that of most economists and market participants, reflects the business cycle (however) there are two important cycles to pay attention to — the business cycle, or short-term debt cycle, and the debt supercycle, or long-term debt cycle

  “We are seven years into the expansion phase of the business/short-term debt cycle — which typically lasts about eight to 10 years — and near the end of the expansion phase of a long-term debt cycle, which typically lasts about 50 to 75 years…Since the long-term debt cycle issue is the biggest issue that separates my view from others, I’d like to briefly focus on its mechanics…

“…There are limits to spending growth financed by a combination of debt and money. When these limits are reached, it marks the end of the upward phase of the long-term debt cycle. In 1935, this scenario was dubbed pushing on a string

“This scenario reflects the reduced ability of the world’s reserve currency central banks to be effective at easing when both interest can’t be lowered and risk premia are too low to have quantitative easing being effective.”

Noting our capital allocation system is driven by spreads Dalio writes:

“…where things now stand across the world’s reserve currencies. expected returns of bonds (and most asset classes) are relatively low in relation to the expected returns of cash. As a result, it is difficult to push the prices of these assets up and it is easy to have them fall. And when they fall, there is a negative impact on economic growth.

When this configuration exists…stimulating demand is more difficult, and restraining demand is easier, than is normally the case.

At such times the risks are asymmetric on the downside…

DISCLAIMER ON INVESTMENT ADVICE

1: This website is not advisory. Opinions, comment and analysis are provided for information, are not intended as investment advice and may not be used as investment advice.

2: Investors seeking advice should retain the services of a regulated and qualified adviser.

3: Opinions expressed in comment on this site have short sell by dates and may be  past their sell by the  date when they are read.