How you or I feel about the controversial Trans-Pacific Partnership doesn’t seem to matter, though. Questions, comments and protests have all been ignored by governments of all 11 remaining nations. Trump’s America has chosen the route of isolation and protectionism. A short-sighted path that’s usually far more destructive to jobs, and whole economies, than free trade.
The Bank of England (BoE) is responsible for monetary policy in the UK. They decide whether to move interest rates within the British economy. They do this to achieve a ‘stable’ rate of inflation. However, you need to ask - Is the current structure of government and central banks working? The future of financial and economic systems is with the new BOE. Except this isn’t the BOE as above...
I’m not saying there aren’t problems in the global economy. Years of artificial global bank stimulus have caused, and will cause, all sorts of distortions. But to think that it will cause another deflationary global meltdown is playing the low probability game.
If the debt ceiling doesn’t get raised, it means the US government can’t borrow more money. The risk then is that the Treasury might run out of money and literally be unable to make payments on US Treasury bonds. That’s the US government defaulting to every other nation, most notably China.
Just because rates have been at records lows doesn’t mean they can’t go any lower. For one, there’s the Aussie property market to think about. However, by looking at what the big banks are doing, we can glean what the RBA is likely to do in the future.
Right now, pass the cash parcel is in full swing, and central banks are only very timidly trying to reduce the size of the parcel. That’s basically why you’ve seen the US stock market rise unimpeded for the past two years. Central banks are behind the curve. There is too much cash in the system given the positive investor psychology that is unfolding.
The Aussie dollar is getting a boost from stronger commodity prices. Recent price rises have helped push the dollar higher. The Aussie dollar has had a strong start to the year. However, it may be more cyclical than anything to do with the underlying strength in the Aussie dollar.
There’s a strong chance that the US will never pay their debts back. In the past the only two ways a country would get out of such a mess is by strongly devaluing their currency. Such a move would end the US’s economic dominance. None of these outcomes is particularly good for anyone.
I’m all for tax cuts, but personal tax cuts are what needs to be on the table. And the issue of fairness needs to be addressed too. Society can’t function when the only people paying tax are honest middle-class workers.
In today’s piece, from 16 November, Ryan explains what ancient Chinese proverbs have to teach the modern investor. He looks at why interest rates are inevitably headed up in 2018, and both the good and bad things that could mean for your investments.