Jim Rickards Blog (2)

Economic NewsThe S&P (2,126) and the DOW (18,232) both are trading above their 20 and 50 Day Moving Averages, after testing them again this week. However, the experiences of countries like Ghana, Russia, Zambia and Brazil show that devaluation is not the perfect solution to our economic problems. They are also facing the challenges caused by the fall in global oil prices and lower demand for commodities from China and elsewhere in the world. Reacting to the last public finances update before the spending review, a Treasury spokeswoman said rising employment and wages showed the government’s economic plan is working”. It suggests Europe’s largest economy will keep growing in the final months of 2015.Economic News

Howard Archer, economist at the consultancy IHS Global Insight, described the latest figures as very disappointing and difficult news for Chancellor George Osborne to digest”. The chancellor will obviously be hoping that the economy can kick on and is not hampered by global growth being held back by a marked slowdown in China and emerging markets,” said Archer.

French inflation was up +0.1 percent year-on-year in September while Italy was up +0.2 percent; Spain continued along a deflationary path at -0.9 percent. That said, as pipeline takeaway capacity of 2 Bcf/d comes online in the coming months, demand for more Marcellus gas will help production to rebound. Economic leadership seems to be missing and, as a consequence, officials seem to be trying this suggestion or that suggestion in order to help things out in the short run.

The economic solutions needed may not be of a short-term nature, but may need to have a longer-term focus…but how do the nations get a longer-term focus. Right now, a long-term vision seems to be missing from most of the efforts to combat economic problems. First, the short-run policy prescriptions that are being proposed in the western economies will only serve as an extension of the current economic dilemmas that they are facing. Against that backdrop, China’s tight peg to an appreciating U.S. dollar meant the yuan’s real trade-weighted exchange rate had climbed more than 10 percent over the past year, even as its economic growth slowed and exports slumped.

This de facto tightening of monetary policy has eroded the competitiveness of U.S. exports, eaten into economic growth and diminished company profits repatriated from overseas. Over the past decade, the U.S. Congress has pressed Beijing to loosen its dollar-pegged exchange rate to allow the yuan to appreciate, arguing that trillions of dollars of currency market intervention had depressed the yuan artificially and given China an unfair trade advantage on global export markets.

Economic News