Tag Archives: economical meltdown

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Azerbaijan Currency Crashes 50% As Crude Contagion Spreads

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Categories: Forex Capital Today, News Flash - Market today, Tags: , , , , ,

OPEC blowback continues to ripple around the world. With Russia’s Ruble pushing back towards record lows against the USD, and Kazakhstan’s Tenge having tumbled to record lows, the writing was on the wall for Azerbaijan. As Bloomberg reports, the third-biggest oil producer in the former Soviet Union moved to a free float on Monday and the manat crashed almost 50% instantly to its weakest on record with the second devaluation this year.

First the Russian Ruble…

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/12/20151221_oil2.jpg

Then Kazakhstan’s Tenge…

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/12/20151221_oil3.jpg

While Azerbaijan’s former Soviet allies Russia and Kazakhstan have moved to floating currency regimes in the past year, the Azeri central bank has questioned whether the country was prepared for a similar shift. Governor Elman Rustamov said there was no need for another devaluation of the manat, according to a televised interview broadcast on Sept. 25.

And now Azerbaijan’s Manat crashes 50%…

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/12/20151221_oil1.jpg

As Bloomberg reports, “It looks like Azerbaijan’s authorities are following Kazakhstan’s devaluation path,” said Oleg Kouzmin, a former Russian central bank adviser who works as an economist at Renaissance Capital in Moscow. “After devaluing the currency once, some time ago, they concluded that the first move was not enough to tackle all the challenges of a weaker oil price environment.”

Azerbaijan relies on hydrocarbons for more than 90 percent of its exports and the manat has lost almost half its value against the dollar this year, the worst performance of currencies globally.

 

The Azeri central bank’s reserves were at $6.2 billion at the end of November, down from more than $15 billion a year earlier.

 

The Russian ruble’s collapse and a 70 percent plunge in the crude price since June last year have ushered in a new era of volatility for Azerbaijan, which is also beset by challenges ranging from declining oil output to a festering conflict with neighboring Armenia.

“The only real surprise is that they waited so long, blew scarce FX reserves in the process, and thereby undermined the sovereign balance sheet and credibility and confidence in the process,” Timothy Ash, head of emerging-market strategy at Nomura International Plc. in London, said by e-mail.

 

 

 

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The Crisis Is Not Financial But Evolutionary

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Categories: News Flash World Economy, Tags: ,

In the News (from Stratfor): “The global financial crisis of 2008 has slowly yielded to a global unemployment crisis. This unemployment crisis will, fairly quickly, give way to a political crisis. The crisis involves all three of the major pillars of the global system – Europe, China and the United States. The level of intensity differs, the political response differs and the relationship to the financial crisis differs. But there is a common element, which is that unemployment is increasingly replacing finance as the central problem of the financial system. …

“Consider the geography of unemployment. Only four countries in Europe are at or below 6 percent unemployment: the geographically contiguous countries of Germany, Austria, the Netherlands and Luxembourg. The immediate periphery has much higher unemployment: Denmark at 7.4 percent, the United Kingdom at 7.7 percent, France at 10.6 percent and Poland at 10.6 percent. In the far periphery, Italy is at 11.7 percent, Lithuania is at 13.3 percent, Ireland is at 14.7 percent, Portugal is at 17.6 percent, Spain is at 26.2 percent and Greece is at 27 percent. …

“A rule I use is that for each person unemployed, three others are affected, whether spouses, children or whomever. That means that when you hit 25 percent unemployment virtually everyone is affected. At 11 percent unemployment about 44 percent are affected.

“It is important to understand the consequences of this kind of unemployment. There is the long-term unemployment of the underclass. This wave of unemployment has hit middle and upper-middle class workers. … Poverty is hard enough to manage, but when it is also linked to loss of status, the pain is compounded and a politically potent power arises. …

“Fascism had its roots in Europe in massive economic failures in which the financial elites failed to recognize the political consequences of unemployment. They laughed at parties led by men who had been vagabonds selling postcards on the street and promising economic miracles if only those responsible for the misery of the country were purged. Men and women, plunged from the comfortable life of the petite bourgeoisie, did not laugh, but responded eagerly to that hope. The result was governments who enclosed their economies from the world and managed their performance through directive and manipulation.

“This is what happened after World War I. It did not happen after World War II because Europe was occupied. But when we look at the unemployment rates today, the differentials between regions, the fact that there is no promise of improvement and that the middle class is being hurled into the ranks of the dispossessed, we can see the patterns forming.”

Read on…

the-crisis-is-not-financial-but-evolutionary

 

 

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Listless Euro reacts to ECB doubts

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Categories: Forex Capital Today, News Flash - Market today, Tags: , , , , , ,

The Euro was little changed earlier today, as it appears “capped” with rising doubts about whether policymakers can reach an agreement for action in September, which would provide some relief to debt stricken Euro zone countries such as Spain and Italy.

I expect the Euro to reverse in the next few days as to now, traders have been focusing on only positive indicators which could change.

A reality check is now due after the Euro has remained buoyed by hopes that the European Central Bank (ECB) would start buying bonds of the struggling Euro zone members next month. I expect the market to shift its focus back to the problems facing Euro zone policymakers as they resume talks after summer holidays.

Yesterday Germany’s Bundesbank stepped up its resistance to an ECB plan to purchase billions of Euros worth of Spanish and Italian government bonds.

The French President, Francois Hollande, and German Chancellor, Angela Merkel, will meet on Thursday. On Friday Greece’s Prime Minister, Antonis Samaras, arrives in Germany for talks and is expected to lobby for a two-year extension of austerity measures in order to soften their negative economic impact.

If Greece and the EU cannot reach an agreement, in such case, we could see speculation about Greece’s exit from the Euro zone rekindled.

The Euro stood little changed earlier today at $1.2350, down from its August 6th peak of $1.2440.

The Dollar was trading at 79.41 Yen, down from Monday’s five week high of 79.66 Yen.

On Wednesday the Federal Reserve is due to publish minutes of its two-day meeting that ended on the 1st of August. The Fed, which has pledged to keep its benchmark rate near zero through 2014, has refrained from adding to the $2.3 trillion in asset purchases it has already made to support the economy. It will next meet on the 12th and 13th of September.

The Aussie meanwhile has underperformed against other risk sensitive currencies recently, being down 0.2% so far in August, having only gained slightly after the minutes of the RBA’s latest meeting gave no hint of further easing. The Aussie earlier was at $1.0475, up 0.3% on the day.

All the best and trade safe.

Erik

 

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The name of the game is Risk Aversion on Currencies !

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Categories: Forex Capital Today, News Flash - Market today, Tags: , , , , , , ,

Earlier today, the Euro hit its weakest level since July 2010 to the Dollar. This followed a clash between European leaders over joint bond sales at a summit.

The Euro also declined for a third day against the Yen. This as a Euro area report is due, that economists predict will show that services and manufacturing industries have shrunk for a fourth month.

The Dollar and Yen have both climbed as against most of their major counterparts. Speculation still persists that Europe’s debt crisis is deepening and this has boosted demand from investors for safer assets.

The Euro stood at $1.2580 earlier from $1.2582 yesterday, when it touched its lowest level since the 13th of July 2010 at $1.2545. It dropped 0.3% to 99.71 Yen, while the Dollar stood at 79.48 Yen.

Bank of Japan (BOJ) Governor, Masaaki Shirakawa, today stressed the central bank’s resolve to maintain its ultra-loose monetary policy. He ruled out though, any easing solely for the purpose of weakening the Yen.

He went on to say that there was no clear historical evidence, that an expansion in Japan’s monetary base does lead to a weaker Yen. This countered views that the central bank can directly push down the Yen by injecting more money into the economy.

He considered, that the biggest factor affecting currency moves at the moment, is investors’ risk aversion and went on to stress, that monetary policy alone cannot influence Yen moves.

In February, the BOJ had eased monetary policy and set an 1% inflation target. It did so in order to show its determination to beat the deflation that has plagued Japan for over a decade.

The BOJ had followed up with even more monetary easing during April. Since then, it has remained under political pressure for further action to support the economy and counter the hardship resulting from a stubbornly strong Yen.

The BOJ has pledged to pursue powerful monetary easing until such time that an 1% inflation figure is in sight, and will likely continue with its efforts to beat deflation with its key monetary easing tool; its asset-buying program.

On the longer term time line surely the euro will have some export easing benefit from the Euro drop, even so as it continues fall down hill.

On shorter term we still have this contagious crisis…keeps popping out as popcorn on a micro..

I can promise one thing, it is going to be a very HOT summer, did you remember last years summer ?

Yes, same thing just bigger….

All the best!

Erik

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Stocks are tumbling around the world !!!!

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Categories: News Flash World Economy, Tags: , , ,

U.S. stocks are now getting hammered. Commodities are imploding. Bank stocks are falling worldwide, and some markets in Europe are at multi-year … and even MULTI -DECADE lows!

What’s most surprising about the breakdown of Europe is not how swiftly it’s happening, but how complacently US investors and others are responding …

This is what happens when you only
paper over a problem, rather than cure it!

How can this be happening? Didn’t central bankers print trillions of yen, euros, pounds, and dollars in the past couple of years to prevent and “cure” these problems? Weren’t we told repeatedly by both European and U.S. policymakers that the problems in the debt markets were contained?

Yeah, we were.

But hopefully, you’ve learned your lesson from the U.S. mortgage debacle. Some policymakers will outright lie to keep you from selling stocks, bonds, or otherwise taking steps to protect yourself from the fallout of a serious debt crisis. Others are just woefully ignorant of the severity of the underlying problems.

Think I’m off base?

Then look at what former U.S. Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke did during the subprime meltdown! They gave speech after speech saying the problem was “contained” and that it wouldn’t have a major impact on the U.S. economy. But you don’t need me to tell you those predictions weren’t just off by a small degree.

They were 100% dead wrong!!

Now we’re getting the same song and dance from Europe. The ESM. EFSF. LTRO. We’ve been told that all of these whiz-bang money printing and bailout programs would prevent a crisis, and that the crisis itself really isn’t that bad.

But try telling that to a Greek investor, who has now lost every single penny of gains he racked up in the last TWENTY YEARS! Here’s the chart of the Athens Stock Exchange General Index. You can see it’s trading around 610, a level last seen in November 1992.

It’s not just the Greek exchange getting hammered though. Spain’s main index is now at its lowest level since March 2009, while markets across Europe are slumping fast.

This just goes to show that when you paper over a crisis, rather than try to solve it directly, you might be able to gain a week, a month, or even a quarter or two of calm. But ultimately, your efforts will prove futile if you don’t get rid of the underlying problems!

 

Until next time, good trading

Erik