Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

US Now Importing the World's Deflation

Economics / Deflation Nov 01, 2014 - 04:08 AM GMT

By: John_Rubino

Economics

With US QE about to end, the rest of the world faced the prospect of another "taper tantrum" financial crisis, one that this time around could suck the world into a deflationary vortex. So it should come as no surprise that the end of QE was countered with a series of offsetting treats for the global financial markets:

• The US Fed promised to keep interest rates low for a really long time.

• The European Central Bank announced that in November it would start buying asset backed bonds, in effect beginning an open-ended, potentially huge debt monetization program of its own.


• Japan's version of Social Security is massively increasing its equity purchases:

Japan's public retirement-savings manager will put half its holdings in local and foreign stocks and start investing in alternative assets as the world's biggest pension fund seeks higher returns.

The 127.3 trillion yen ($1.1 trillion) Government Pension Investment Fund set allocation targets of 25 percent each for Japanese and overseas equities, up from 12 percent each, it said at a briefing today in Tokyo. GPIF will reduce domestic bonds to 35 percent of assets from 60 percent. The new figures don't include an allocation to short-term assets, while the previous targets did. Analysts surveyed by Bloomberg this month had anticipated levels of 24 percent for local stocks, 15 percent for global shares and 40 percent for Japanese bonds, taking short-term holdings into account.

And last but definitely not least:

Japan central bank shocks market with fresh easing

LOS ANGELES (MarketWatch) -- In an unexpected move, the Bank of Japan's policy board voted by a 5-to-4 margin to expand the pace of its quantitative easing, sending Tokyo stocks soaring and the Japanese yen falling sharply.

The central bank expanded the size of its Japanese Government Bond purchases to the equivalent of "about 80 trillion yen" ($727 billion) a year, an increase of ¥30 trillion from the previous pace. It said it would also buy longer-dated JGBs, seeking an average remaining maturity of 7-10 years.

The central bank also said it would triple its purchases of exchange-traded funds and real-estate investment trusts.

Concerns about dwindling inflation appeared to drive the move, with the Bank of Japan saying that "on the price front, somewhat weak developments in demand following the [April 1] consumption-tax hike and a substantial decline in crude-oil prices have been exerting downward pressure recently."

The equity markets loved all this, of course. Japan's Nikkei index rose an amazing 4.83% on Friday. The S&P 500 is up about 3% on the week and most emerging markets are soaring. From the point of view of bureaucrats attempting manipulating formerly-free markets, this is a ringing success. Unfortunately, like most attempts to mess with the laws of nature, it contains the seeds of its own demise.

First and foremost, the end of QE in the US coupled with a ramp-up of bond buying in Europe and Japan has the dollar up sharply:

US Dollar Index

A surging currency is functionally the same thing as rising interest rates in that it tends to cut corporate profits while making debt harder to manage for pretty much everyone. So it's good for savers (who see the value of their savings rise) and bad for borrowers, both individual and governmental. And that -- more onerous debts and plunging corporate profits -- is what the US is looking at in 2015.

This is coming at a really bad time for some crucial parts of the economy. Housing, for instance, is looking like the end rather than the beginning of a recovery, with mortgage purchase applications at 19-year lows (chart courtesy of Zero Hedge):

Home Purchase Mortgage Applications

The upshot: As good as things feel right now in the stock and bond markets, they'll feel that bad or worse when it dawns on the leveraged speculating community that the rest of the world is exporting their deflation to America.

By John Rubino

dollarcollapse.com

Copyright 2014 © John Rubino - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules