The latest edition of our weekly finance and property news digest with a distinctively Australian flavour.
Contents:
- 00:20 Introduction
- 00:55 US Markets and Data
- 03:40 Trade Deals
- 05:10 Bitcoin Risks
- 06:30 Japan
- 07:40 China
- 07:50 UK
- 09:40 Sweden’s Negative Rate Reversal
- 12:00 The Global Waves of Debt Report
- 13:30 Australia
- 13:30 MYEFO
- 15:25 Unemployment and Migration
- 16:00 Loan Flows
- 16:35 Household Ratios
- 17:40 Home Prices
- 19:10 Australian Markets
– Topic: Interest rates.
– When I look at what has happened in the last say 15 months with interest rates then I predict that we have seen the VERY ULTIMATE end of a 38 year (US) and a 29 year (Australia) bull market (=falling interest rates) in T-bonds. I think that long term rates can easily double or triple from here in the next say 6 months. And the Trump administration running trillion dollar plus deficits is NOT “helpful” either.
– No, rising interest rates is NOT the result of “Inflation”. In my experience things like “Inflation” and “Deflation” are extremely poorly understood. People then seem to be spouting all kinds of nonsense.
– Rising rates are actually very DEFLATIONARY. Because then 1) the VALUE of a T-bond will fall. 2) More and more (aussie) households will be faced with rising interest payments and will default on their mortgage payments (=Deflation).
– I consider the CASS freight index and the Trade Deficit to be more reliable than the calculation of the US GDP.
– I also want to bring to your attention that the US Treasury has near REAL TIME data available on it website on the amount of tax receipts. Perhaps you’re interested in following that data ?
– Based on 2 things I think the US economy already has / could already have entered a (new) recession:
1) It seems the Trade Deficit already is in the process of shrinking. See also what happened in 2006-2009 with the US Trade Deficit. From “Calculated Risk”:
https://www.calculatedriskblog.com/2019/12/trade-deficit-decreased-to-472-billion.html
2) The CASS freight index also has peaked and seems to be on the way down.
From “Wolfstreet”:
https://wolfstreet.com/2019/12/19/us-freight-shipments-fall-below-2014-hit-by-shale-oil-gas-bust-manufacturing-construction-also-drag/
Notes:
– I see a relationship between the Trade Deficit dipping in 2015 & 2016 and the “Freight recession” (1st chart in that Wolfstreet article) in the same 2 years. And that is NOT surprising because when the consumer is spending money on goods then those goods also have to be transported/shipped.
– Does Steve Keen have some charts on the US economy ? Think of his famous formula: income + change in debt = aggregate demand. Using this formula Keen thought that the US already entered a (shallow) recession in the 1st quarter of 2005 (think: peaking of the US housing bubble). Whereas the NBER thought the US recession started in november of 2007. As time went the charts told Keen that after the 1st quarter of 2005 the US recession became deeper and deeper. And we all know what happened in 2008 & 2009.