Rotating sovereign crises

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 after the Fed confessed that the US economy may not recover for five or six years.

“The worm is turning,” said David Bloom, currency chief at HSBC. “We’re in a world of rotating sovereign crises. The market seems to become obsessed with one idea at a time, then violently swings towards another. People thought the euro would break-up. Now we’re moving into a new phase because we’re hearing alarm bells of a US double dip.”

Get that? The most powerful central bank in the world says the US will not recover for 5-6 years. If we are not within the start of a deep oil supply crunch by that time I will be extremely surprised, which means there will be no recovery in 5 or 6 years time either. Extrapolate that out further as you wish, taking into consideration the already record debt levels.

The US workforce has shrunk by a 1m over the past two months as discouraged jobless give up the hunt. Retail sales have fallen for the past two months. New homes sales crashed to 300,000 in May after tax credits ran out, the lowest since records began in 1963. Mortgage applications have fallen by 42pc to 13-year low since April. Paul Dales at Capital Economics said the “shadow inventory” of unsold properties has risen to 7.8m. “The double dip in housing has begun,” he said.

1 Comment

  1. Author
    ptsp 6 years ago

    You have to go there regularly to get a feel for the global situation Pakistan always has problems for example. Same to some extent for Africa but it seems to have gotten worse lately. My take is that supplies are now somewhat problematic again in the third world.
    You really have to read it on a daily basis as there are always problems in the third world however after a bit you can start to notice trends with reported supply problems doing a fairly good job of tracking price changes. They basically move from crisis to crisis but you notice that as once country solves a crisis another one enters. My model is whack a mole for third world supply. We have had a persistent supply problem in the third world for some time now and it seems to be getting steadily worse.

    We are not at 2008 levels yet but it seems to be heading in that direction fairly quickly.

    So my final conclusion from looking at a variety of data is that oil supplies are problematic just not yet bad enough to cause obvious price strains but this changes fairly quickly you can go from ok to in bad shape over a matter of weeks. It all depends on what the real numbers are.

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