User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Friday September 10, 2010 - 17:26:42 GMT
Black Swan Capital -

Share This Story:
| | Email

A Friday Ramble of Doom

A couple of years ago, as the credit crunch was starting to crunch, we showed two charts that suggested bad news ahead.  One was the US Current Account graphic showing an improvement that started over a year before the credit crunch hit, suggesting at the time credit was already draining out of the global economy.  The second was the Fischer Debt-Deflation Theory.  
[Chart not available in text format]

At the time, we said the US could be following down the same policy path as Japan.  Japan ran right on the Fisher plan.  And with a couple of years of hindsight, the US is doing a pretty good imitation of its friend from the east. 

Keep in mind how incredibly overleveraged the globe was when the credit crunch reared its ugly head.  The total value of derivatives outstanding was about 10 times greater than total world GDP combined.  It is an astounding number, considering about 20-years before the level of derivatives was somewhere around 1/5th of total global GDP. 

Granted, not all derivatives are created equal.  In fact, many are quite useful and important to operating a modern financial system that is globalized.  Problem is so many of the derivatives created were so darn awful.  Heck, some were so bad and so dubiously fabricated one might have thought they were designed precisely so investment banks and some well connected hedge funds could profit from them exploding.  But I digress ...

If we fast forward to now, and watch all that public debt being thrown into the market place as the private stuff we just talked about continues to fade, i.e. often referred to as private deleveraging, it is no surprise this massive level of de-leveraging has suppressed the stimulative impact of new credit as governments pump up their debt-to-GDP ratios (with our money of course).  We know this story ... but let’s quickly look at some validation.

If our policymakers had read what Fischer said in point #2 and #8 above about falling velocity, they would have known their efforts would be thwarted to a large degree and any infusion to financial institutions would mostly stay with financial institutions for a while.  This is precisely why the Fisher Model makes sense. 

Many analysts rely on the Milton Friedman quip: “Inflation is always and everywhere a monetary phenomenon,” to justify their view that all the credit being created by the Fed and Federal Government will be massively inflationary.  But Fisher understood that money that is not spent on real goods, whether it remains stuck in the financial system (which isn’t money but only the potential to be so) or is hoarded, as in point #8 again above, is not inflationary.  In fact, if it persists then the lack of confidence leads to more hoarding, and hoarding (or not spending) becomes self-reinforcing, i.e. “things are so bad I better build up more cash” mentality multiplied across our fair land. 

Add to the consumer mentality side, plus credit default which not only impoverishes the lender and borrower, it destroys collateral values by virtue of the fact the pool of wealth supporting the lending is gone -- as collateral values fall, future lending falls in conjunction.  So no surprise bank loans in this environment are relatively anemic given all the potential credit they have thanks to our illustrious Fed and our tax dollars.

So, we keep seeing this: US Consumer Credit declining for the first time in forever!  There was another reported decline in the numbers yesterday -- not exactly recovery type of raw material now is it? 

US Consumer Credit Outstanding Going Back to 1943:
 [Chart not available in text format]

The next shows US Consumer Credit as a % of US Gross Domestic Product.  It has naturally ebbed and flowed during recessionary periods.  But it’s now ebbing from a very high level.  If this ebb becomes a reversion to the mean type of move, it would represent a huge amount of consumer purchasing power taken out of the global economy.  No wonder policymakers are in panic mode.  Heck, if this trend continues maybe this administration may even layoff the class-warfare jargon soon and give all those “rich” small business owners (otherwise known as labor exploiters to the current regime’s base) a real tax cut (instead of some useless targeted complicated credit) to actually infuse some confidence back into the real economy.  Sorry, a man can dream!
[Chart not available in text format]
And of course yesterday, we had a bit of surprise improvement in the US trade numbers, i.e. the US Current Account Deficit improved again. Is that good news or bad news?  We would argue it is bad news near-term, but good news long-term.  Why do we say that? 

Near term it is bad because it supports what the decline in consumer credit numbers are telling us: Mr. US Consumer is shaking off his old drunken sailor ways and finding religion.  

Anyway, as you all know this continued downward momentum of US consumer demand (granted the jury is still out), if it is that, continues apace at a very treacherous time -- a time when most all the big players credited with keeping the wheels of commerce greased (Germany, China, and Japan) -- need to export for grease to flow.   

What happens when everyone wants to export and few wish to, or lose the capacity to, import (a la the core states within Europe now being crushed by austerity; with Germany being the exception but soon to lose that demand is our guess)?  You guessed it: it’s “beggar thy neighbor” time. 

And when was the last time we saw the nasty impact of “beggar thy neighbor” in a big way?  I think it was during the so-called Great Depression.  Countries did all they could to avoid taking the impact of dwindling global demand domestically, thus currency devaluations and trade barriers resulted. 

And who do we coin the biggest of the “beggar they neighbor” players (though all play the game)?  Another easy question indeed—China.

You may have noticed the news story on the wires this morning. If you didn’t, the gist of it is this: Japan is complaining because China is buying Japanese bonds.  Say what?  Yes, you heard that correctly.  The problem of course is that buying Japanese government bonds by China is supporting and pushing up the relative value of the yen, according to Japan. 

There is so much here to discuss it is frightening ... and goes to how completely messed up our global monetary system really is. 

The US effectively begs the biggest “beggar thy neighbor” to buy its bonds at each auction.  Yet Japan, still thinking the internal funding of debt game is easy (back when Japanese savings were 20%, maybe, but now that savers are near zero that game is about over), is worried about the impact on the yen.  It is too fresh. We used to hear that the value of the currency didn’t matter when the US or Europe complained about undervalued Asian-block currencies, but now, of course, it matters greatly.  Secondly, it shows that China, with all its reserves thanks to keeping its currency about 50% undervalued relative to the US dollar (if you believe The Economist Big Mac Index), has no place to hide.  If they stop buying US Treasuries to keep their currency relatively suppressed, they take trade friction heat elsewhere. 

It also begs the question: why in the heck does anyone want Japanese bonds now?  Granted the US debt picture looks ugly, but we’d bet big that Japanese government bonds break first, on a relative basis.  Why do we say that?  Well, the US doesn’t yet have debt to GDP anywhere close to 200%; and remember the dirty little secret we started out with: US savers are saving and Japanese savers are not.  Thus, Japan’s need for capital may soon hike up tremendously relative to the US.  They will need to hike rates for international investors to take on that risk, telling the world that Japan can internally fund no more.  Fy slamma jamma! 

You may also remember when China supposedly poured a little more into European bonds, as a much needed shot of confidence; it also dovetailed with the rise in the euro, which, you guessed it again, makes German exports less competitive against China clearing the way for transfer of China’s much needed domestic adjustment off onto its trade partners.  We would say two-for-two on Chinese allocation of fresh funds to European and Japanese bond markets.

This our last “guess what” -- China better start circling the wagons because the natives are getting very restless; which suggests why our favorite economic czar, Larry “I am somebody” Summers is in China this week.  He likes the food, but danger abounds and it’s why he abandoned his post at the White House.  Here’s to hoping he stays awhile.  Sorry, a man can dream!

But hope springs eternal as China “reported” its imports rose sharply for the month of August.  As to content, we don’t know.  But we do know this: this is not your usual cyclical recession thanks to the massive leverage still in place and massive malinvestment held afloat because of artificially low interest rates (which goes to point #9 in Fischer’s brilliant summary, i.e. low rates have zero stimulative impact when real rates, thanks to deflation, are rising). 

We are not usually this doomy and gloomy -- sorry.  But because, as you well know, Keynes is not our favorite economist, our gloom grows.  If fiscal policy is powerful and lags, then all that potential money thrown into the financial institutions will eventually make its way into the real economy, pulling us out of this gloom and proving our economic czar right. 

Commodity currencies -- Aussie and New Zealand dollars-- are challenging their old highs (pre-credit crunch) against the US dollar again.  Suggesting by price action alone growth will continue. 

But if beggar they neighbor continues, exposing the fault lines so everyone can see just how precarious this so-called system is wired, the credit crunch might look like child’s play and the next phase will likely look like Chuckie (of horror movie fame).  That’s bad news, because those who are supposed to protect us from Chuckie have no bullets left in the gun.   

Here is the scary part, according to Fischer [our emphasis]:

“It is always economically possible to stop or prevent such a depression [1929-33] simply by reflating the price level up to the average level at which outstanding debts were contracted by existing debtors and assumed by existing creditors, and then maintaining that level unchanged.”

What if Fisher is wrong about “always” being able to reflate the price level?  What if because we no longer operate effectively in a closed-loop economic system primarily dominated by domestic factors somewhat controllable and instead policies shaped for that just don’t work in a globalized world where major capital flows and related market adjustments can be manipulated more easily? 

So far, the world’s defacto central bank, and world’s most powerful fiscal policy have been unable to inflate the price level.  If they can’t, the path is a real market solution that will be that much uglier thanks to policymaking failure.


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105