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Deflation Is Winning – Beware!

Expect the ride to get even rougher
Friday, July 24, 2015, 10:03 AM

Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years.

Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.  » Read more


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Greece Humiliated

The Troika wants Greece to be a warning to the other PIIGS
Monday, July 13, 2015, 6:50 PM

Well, that went badly. For the Greeks in general and for Tsipras specifically. After many years and rumors and brinksmanship, and a powerful "No" referendum from the people of Greece, Tsipras managed to ‘secure’ for Greece a deal worse than any other offered to date. » Read more



Why Greece Is The Precursor To The Next Global Debt Crisis

The Eurozone fantasy will be one of the early casualties
Friday, July 10, 2015, 10:48 AM

There is no way for Greece to fix its debt problem if it keeps the euro as its currency.  Every purported solution that doesn’t address the core cause of the debt is mere theater. » Read more



The Consequences of a Strengthening US Dollar

It actually creates destabilization
Wednesday, November 12, 2014, 10:21 AM

In early September, I made the case for a rising U.S. dollar. Since then the dollar has continued its advance, and is now breaking out of a downtrend stretching back to 2005—and by some accounts, to 1985.

So what does this mean for the global economy? » Read more



Why The Strengthening Dollar Is A Sign Of The Next Global Crisis

It causes the weaker parts of the system to fail faster
Wednesday, November 12, 2014, 10:21 AM

Executive Summary

  • Understanding the two different ways money flows into the US dollar
  • How currency crises elsewhere can send the dollar skyrocketing
  • Why yen, yuan and euro printing are not the same as dollar printing
  • How these accelerating money flows are creating the next global crisis

If you have not yet read The Consequences of a Strengthening US Dollar available free to all readers, please click here to read it first.

In Part 1, we surveyed the key dynamic that is playing out across the globe: the problems revealed by the Global Financial Meltdown of 2008-2009 were not addressed; they were in effect shifted into the foreign exchange (FX) market. Now the risk bubble is in the FX market.

The complexity of the feedbacks into the FX market is nothing short of mind-boggling, and rather than attempt a comprehensive survey, I’m highlighting the dynamics that hold the greatest risks of triggering instability, not just in finance but in geopolitics, trade and commodities.

Two Kinds of Dollar Flows

Let’s start by differentiating between the two kinds of money flows into the dollar:

  1. Money converted from periphery currencies into dollars to pay back loans denominated in dollars
  2. Money flowing out of periphery economies and into dollar-denominated assets such as stocks, bonds, real estate and dollar-denominated bank accounts.

Broadly speaking, both of these capital flows are “risk-off,” but they have different effects.

In the first case, money borrowed on the cheap in dollars and invested in high-yield periphery bonds earned a tidy profit as the dollar weakened. The trader picked up a double profit: the arbitrage on the interest rates (borrow at .25% and earn 4+%) and the FX profit from the rise of the periphery currency and the decline of the dollar.

This currency-arbitrage profit reverses when the dollar starts rising, and it quickly wipes out the entire interest-rate profit as it leaps higher.

The carry trade is “risk-on” because money is being borrowed to speculate in interest-rate arbitrage. Deleveraging this trade is “risk-off” because the only way to stem the potential losses as the dollar strengthens is to... » Read more


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Off the Cuff: Market Mayhem

After the recent carnage, what's next?
Thursday, October 16, 2014, 8:12 PM

In this week's Off the Cuff podcast, Chris and Alasdair MacLeod discuss:

  • The Market Meltdown
    • What the heck just happened?
  • The Next Round of Bailouts
    • If you hate the problem, wait till you see the solutions
  • Gold
    • Ready for a return to the limelight?
  • Ebola
    • Is the media selling us too much fear?


Why The Dollar Is Gaining Strength

Warning us of another impending financial crisis?
Monday, September 8, 2014, 7:30 PM

Recently, the US dollar has gained at lot of territory compared to the yen, pound, euro, ruble, and pretty much every other currency you can think of. The dollar is now at a 14-month high and has been on a real tear.

The reasons why are not that hard to understand, and it's important that we do. » Read more



Alasdair Macleod: All You Need To Know About Negative Interest Rates

The implications of the ECB's radical decision
Sunday, June 8, 2014, 9:14 PM

On Thursday, the European Central Bank (ECB) took the historically unprecedented step of lowering certain of its interest rates below 0%. In a report to our premium subscribers immediately following the announcement, Chris likened the move to the policy equivalent of dropping a neutron bomb.

In the days following, despite the ECB attempting to clarify its stance further, many questions still linger; most notably: What exactly will the implications of this negative interest rate (NIRP) policy be? » Read more

Daily Digest

Image by JasonParis, Flickr Creative Commons

Daily Digest 7/31 - India At Watershed, Detroit Has Bigger Problems Than Bankruptcy

Wednesday, July 31, 2013, 11:01 AM
  • Shipbuilders' losses seen widening
  • Bank of Cyprus deposits raid boosts finances
  • Greece sells state lotteries, clears way for OPAP sale
  • UK Losing Fight Against E-Crime Amid Budget Cuts, Parliamentary Committee Warn
  • Amid bankruptcy, Detroit has a bigger problem
  • Growing copper theft 'like an epidemic' sweeping US
  • India at a watershed as it confronts the spectre of stagflation
  • India central bank pat on rates, cuts growth view
  • African Barrick Writes Down Mines, Cuts Costs After Gold Tumbles
  • Court ruling allows Flint to start collecting on retiree cuts
  • Miami Springs counting on red-light camera revenue in face of deficit

Alasdair Macleod: Europe is a Hot Mess

Its banks are the weak point in the global financial system
Sunday, July 28, 2013, 9:42 AM

It's almost August, the month everyone in Europe takes off on holiday to forget their troubles. This year may be different, though, as not only can many not afford a vacation, but Europe's troubles loom so large that forgetting them won't be easy... » Read more