Volume 16, Issue 31
Week of August 26, 2013
In This Issue
Feature: Special Letter: India’s Challenges
- The Currency Story
- The Story of Trade
- The Gang Rape of a Photojournalist
- Explaining the Currency Mess
- Nurturing the New India
- About Rafiq Dossani
Publisher’s Note: The world economy is in a very strange place today, with national economics the result of powerful, and at times conflicting, pressures. The ongoing Currency Wars first noted here have created artificial lending rates and inflationary pressures everywhere. So-called Quantitative Easing (central banks printing huge amounts of fiat money) has created false temporary lifts in turn around the globe, with Japan’s Abenomics just the most ridiculous and most recent example.
An offshoot of this irresponsible fiscal behavior has been a flood of “hot money” trading in global markets, as total liquidity rises to dangerous new levels. With bankers trained to watch for the opposite, there are no alarms going off on the problem – just as there were none in 2007.
In turn, we’ve seen bubbles showing up all over again in global markets; no surprise there.
And, as in 2007, we are seeing the result of massive investor use of the “carry trade.” Then, it was mostly through Japan. Today, with artificially low central-bank lending rates in every major country, large global funds face a cornucopia of choices regarding where to get their “free” leveraged money. As far as I can tell, the US is likely the carry-trade lender of first resort today, taking over Japan’s role in this tragicomedy.
And then we have the charade of Chinese banks, a group of cash pipelines that we pointed out years ago had as much resemblance to Western banks as a grasshopper has to a fork. Day by day, we see the increasing instability of this system, as new bad loans surface that had been hidden under the state umbrella (and secondary-market “shadow banking” empires).
Finally, with all of this bad behavior by leaders comes a predictable bad outcome. How would we expect to see this in its first stages? Most investors have been looking for hyperinflation, which certainly would normally be the problem.
Today, we are seeing a free-fall in many currencies, with India in every day’s lead news. Luckily for us, Rafiq Dossani has again delivered a timely insider-view of this cascade of events and their local causes, which each of our members will want to read closely. – mra.