Sinking feeling throughout the Euro Area

Sinking more – a long way to go though.

The euro area’s inflation rate unexpectedly turned negative in September for the first time in six months, adding pressure on the European Central Bank to bolster stimulus.

Consumer prices in the 19-nation currency bloc fell 0.1 percent from a year earlier, according to a preliminary report published by the European Union’s statistics office in Luxembourg on Wednesday.

Economists predicted an inflation rate of zero, according to the median estimate of 38 economists in a Bloomberg survey.

Unemployment in the region remained unchanged in August at 11 percent, Eurostat said in a separate release.


That sinking feeling continues on OIL

The canary is dead – I have written before about how to lose money with oil.

It will only get worse. All oil exporters are now seeing the red line for what it is – reality has hit the balance sheet and borrowings to cover the real deficit on the current account have increased in earnest.


This will not end well.

Regime change the answer?

Looks like we might find out shortly with the House of Saud.

That sinking feeling – India

Currency wars are a global contagion.

The butterfly effect of Countries desperately attempting to adjust their currencies to offset a global trade downturn – the all important export performance.

Global demand is soft – will continue to get weak over ensuing months.


Charts courtesy of Deutsche Bank. Click on to emblazon.

The Reserve Bank of India released its CPI forecasts for FY17, and suggests a declining path for inflation.

While the CPI forecast for January, 2016 is at 5.8%, only a shade lower than its August projection of 6%, the CPI forecast for early 2017 has been given as 4.8%.

This suggests that the RBI expects inflationary pressures to continue to come off over the next 18 months, despite GDP growth accelerating from 7.4% in FY16 to 8% by Q4, FY17.

The basis for the larger-than-expected rate cut seems to be this decline in the new CPI forecast for FY17.

Indications of the path ahead for all emerging economies.

A nice drop of 50 basis points – it is not going to get better.

What did anyone really expect?



That sinking feeling – Thailand

Just look at the USD Baht performance – gauge that awkward feeling?


The Thai economy will decelerate in the third quarter primarily due to weak private sector demand.

Evidenced by the annual contractions recorded in both the private consumption and private investment indices in July.

Moreover, consumers were less confident in August.

Stalling economic activity is adding pressure on the military-run government to speed up the implementation of economic reforms in order to spur growth.

As a result, earlier this month, the government approved economic measures worth more than USD 9.0 billion aimed at boosting spending in rural areas and helping small firms.

In early September, the Thai government announced a package of short-term stimulus measures worth THB 342 billion (USD 9.58 billion) in an effort to jumpstart the sluggish economy.

Guess what – ain’t going to work. . . B.

That sinking feeling – Japan

First – Standard & Poor’s (or S&P) downgraded Japan’s sovereign credit rating.

Japan’s sovereign debt is now rated A+.

The rating was downgraded by one notch from the AA- it held earlier. S&P stated, “Despite showing initial promise, we believe that the government’s economic revival strategy—dubbed ‘Abenomics’—will not be able to reverse this deterioration in the next two to three years.”

With a lowering of credibility in Japan-tracking ETFs – such as the iShares MSCI – Japan (EWJ) and the Wisdom Tree Japan Hedged Equity ETF (DXJ) may become wary of their holdings.


Then we have Japan has fallen back into deflation for the first time in two and a half years.

It’s being seen as a setback to efforts to stimulate the economy.

It comes despite encouraging signs of inflation at home. Core prices excluding food and energy were up by 0.8 percent on a year ago.

But headline prices not including fresh food were down by 0.1 percent in August compared to a year earlier – as the domestic picture was offset by slumping global energy prices.

Lower prices are seen as bad for the wider economy, discouraging spending and investment and pulling down wages.

The figures are a blow to the prime minister, coming just a day after Shinzo Abe pledged to refocus on his ‘Abenomics’ growth project.

Now the Bank of Japan is under increasing pressure to ease monetary policy further, unleashing more stimulus to counter the downturn.


Stupid is as stupid does – Krugman the advisor should hang his head in shame.

The U.S. Federal Reserves sinking feeling – no friends left.


The Federal Reserve needs to “get off zero and get off quick,” Janus Capital Group Inc.’s Bill Gross said in his monthly investment letter, arguing that higher rates will encourage savings and better capital allocation, which in turn will restore economic growth.

“Zero bound interest rates destroy the savings function of capitalism, which is a necessary and in fact synchronous component of investment,” he wrote. But the world’s central bankers are lost in a world of Taylor Rules and Phillips Curves, and obsessed with inflation. What they’re missing, he said, is that these policies “act as a weight or an economic ‘sinker’ that ultimately lowers economic growth as well.”

“The time has come for a new thesis that restores the savings function to developed economies that permit liability based business models to survive – if only on a shoestring – and that ultimately leads to rejuvenated private investment, which is the essence of a healthy economy.”