GLOBAL MARKETS


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IMF Hedges Bets 

Finally, the International Monetary Fund (IMF) is catching up with the Trends Journal’s global economic trend forecasts.

Last week, the IMF slashed global growth estimates to 3 percent, down from 3.8 percent in 2017, the slowest rate seen since the Panic of ‘08. 

The IMF predicts the “Big Four” global economies – U.S., the Eurozone, China, and Japan – will not grow for another five years. 

The growth rate for the U.S. economy was downgraded from 2.4 percent to 2.1 percent for 2020. 

It should be noted, the IMF defines a world recession as growth slipping below 2.5 percent a year. 

Running out of the cheap money injections that artificially propped up equities and economies since the global financial crisis of 2008, the IMF admitted: “With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot.”

“Policy mistakes?”

It’s an entirely fraudulent Bankster racket. 

The IMF loan sharks force governments that borrow money from them to impose “austerity measures” on their citizens, while the global one percent reaps the financial benefits of the “policy mistakes.” All the while, central banks keep injecting monetary methadone to keep the addicted market junkies gambling while artificially propping up segments of economies.    

Asian Paper Tigers

With South Korea’s growth rate expected to fall from 2.6 percent to 2 percent and its export-driven economy falling for the last ten months, its central bank cut interest rates this week 25 basis points to 1.25 percent. 

Now in Week 21, Hong Kong protests are becoming increasingly violent, and Carrie Lam, chief executive of Hong Kong, warned that the city was technically in a recession. 

The IMF also slashed Hong Kong’s growth rate from 2.7 percent to 0.3 percent, which doesn’t fare well for Asia’s financial center.

Those with money are moving their cash to Singapore. And UBS, HSBI, Pictet, and Credit Suisse have opened new accounts typically ranging from $730,000 to $1.5 million. 

Slowdown: Made in China

China reported growth of 6 percent in the last quarter from one year ago, the slowest annual rate in 30 years. While this is looked on as a slowdown, it should be noted that a 6 percent growth rate is quite strong compared to the rest of the developed world.

Growth had dropped from 6.8 percent in the first quarter to 6.2 percent in the second quarter. In addition, Chinese exports fell 3.2 percent, and imports dropped 8.5 percent from one year ago.

Growth in construction activity significantly slowed to 4.7 percent year-to date, down from 5.5 percent in the second quarter.

While Beijing has not aggressively pumped cheap money flows into the system since the recent slowdown, China injected rmb 200 billion ($28 billion) into its banks. Its central bank is expected to lower interest rates again at the end of 2019.

And while President Trump blames China for purposely devaluing its yuan, which is down some 7 percent this year, to increase exports, we disagree.

Exports as well as imports are down. Thus, for example, with China the world’s largest importer of oil, the lower the value of their currency, the more it costs to buy dollar-denominated assets. 

Further, Chinese corporate debt is up some 65 percentage points since the Panic of ’08 and is among the highest and fastest growing in the world. With much of the $18 trillion debt load dollar-based, the weaker the yuan the higher the cost of servicing the debt. 

Fearful of capital outflow as its currency weakens, the Chinese government enacted measures to prevent outbound foreign investments. They are still vulnerable, however, to capital flights.

Should currency outflow increase or inflow decrease, to help slow devaluation of the yuan, China may begin aggressively selling off its reserves, including the some $2 trillion of U.S. Treasuries.  

The yuan dropped more than a third since 2014. The offshore bonds in that currency was valued at $53 billion in the first quarter of 2019, down at least half from 2015. 

The Almighty Dollar

While the U.S. dollar is heading for its worst month against the pound and euro since January 2018, it is near its highest level since May 2017, when measured against other currencies. 

In foreign exchange reserves, however, the euro accounts for 20.24 percent, while the yuan is only 2 percent. The yuan makes up only 4 percent of all foreign exchange trade, while the dollar holds 88 percent of the share.

TREND FORECAST: Minus an unforeseen black swan/wild card event and despite efforts by China, Russia, Iran, and other nations to trade in their respective currencies, the dollar will continue to dominate foreign exchange trade and hold its position as the world’s reserve currency as global economies slow and debt burdens swell. 

Inflation Frustration

In Europe, inflation dropped to its lowest in almost three years. In September, prices rose 0.8 percent from last year, the slowest yearly increase in consumer prices since November 2016. The initial estimates were 0.9 percent. 

What the financial “experts,” banksters, and “educators” fail to understand are the factors pushing inflation and wages down. 

Devised by Gerald Celente in 1999, the “Five-O Formula” – Overproduction, Overcapacity, Open Markets, Overpopulation, and Online – continues to be the premier instrument defining the factors of global inflation and wage stagnation.

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