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Mindful Money

Mindful Money
Mindful Money is a social news and knowledge network for the investment community and it's published by the Social Business Group.

Recent blog posts

  • Is the Bank of England right about the dangers of Bitcoin and digital currencies?
    From time to time, economists appear and suggest that central banks should spend the profits or seigniorage from issuing currency. If you think about it, there is quite a profit margin in turning some ink and paper into something of high value, and electronic money creation which is the modern form has even lower costs.
  • Is the UK seeing a pre-election stimulus rather than more austerity?
    The continued failure on the fiscal deficit front means that the UK has ended up with a larger national debt than expected.
  • What to do about the problem that is Japan and its economy?
    The Japanese Yen has fallen as low as 109.46 Yen to the US Dollar overnight, and touched 141 Yen to the Euro. So the Bank of Japan is currently “winning” the currency devaluation tug of war with the European Central Bank. However, for now I will simply point out that the policy of Abenomics is getting what it wants which is a falling value for the Yen.
  • Is China finally admitting it is in an economic slow down?
    This year has been one, up to now, where the official data coming out of China has rather neatly fitted the objectives of the Chinese government. However, from time to time, numbers and data emerge which challenge such a state of play, and recently we have begun to see them again.
  • What can the ECB learn from the Bank of Japan’s QE experience?
    Today I intend to take one of my regular trips to the economy of the land of the rising sun which is in the throes of a rather extraordinary economic experiment.
  • When did the economy of Ghana stop being an African lion?
    Today I wish to venture south to the continent of Africa to examine the crisis which is currently hitting the country of Ghana.
  • Five things investors learned in the last week
    Insightful facts about last week and five things investors learned.
  • Are higher inflation and falling real wages now the future for the United States?
    One of the features of the credit crunch era is that we get told that things are good for us and they turn out to be harmful. Those in Greece, for example, were told that “shock and awe” and austerity would help them whereas they led to an economic collapse. The UK was told by the Bank of England that it would have disinflation (negative inflation) and falling prices and that this was such an economic evil which needed quantitative easing to prevent this. What happened was quite different.
  • What has made the euro exchange rate defy the pessimists?
    One of the features of the euro area crisis has turned out to be the opposite of so much media spinning and speculation. Whilst there has been regular talk of it being hammered and hit, the exchange rate of the euro is rather strong and has been so since the summer of 2012. Indeed, since its dip to 94.6 on a trade weighted basis last summer, it has been rallying and was at 102.64 as of last week.
  • Will there be taxing times for everybody or just savers?
    Many times as I have surveyed the credit crunch era, it has been apparent to me that economic policy in the countries affected is set to benefit borrowers and debtors. I would love to think that the world economy is now “saved”, and the UK economy’s current mini-boom will extend to the end of time. But, you see, such phases were present in the Great Depression of the 1920/1930s and the clue is in its name.
  • What now for Cyprus and its economy? A downwards wage-price spiral?
    Sometimes events in a single country can illustrate a multiple number of the themes of this blog even if the country is as small as Cyprus. Back in the spring of this year it was “rescued” by its partners in the euro area, and since then it has received one of the worst economic harbingers that a country can receive. From the European Commission (and the emphasis is mine): "Staff concluded that Cyprus’ economic adjustment program is on track." I take that as confirmation of my initial forecast that the outlook for the economy of Cyprus is simply horrible. It may even exceed the declines seen in its near neighbor Greece.
  • Yes or No to IPOs
    After a dearth of flotations and new issues, suddenly the market has barked back into life. This is generally good news as it is a sign that some investor confidence is returning to the markets.
  • What now for Portugal and its economy? Another IMF mea culpa?
    This week the Troika made up of the European Commission,European Central Bank and the International Monetary fund is visiting Portugal to decide on its economic progress. We do not yet know if they will declare their by now familiar harbinger of doom encapsulated by the phrase “on track” but there is food for thought in the fact that this is the 8th and 9th review.
  • Portugal has left its recession but is still in an economic depression
    I wish to discuss the economic situation in Portugal which I have not covered since the 28th of June. There is a reason for the gap which is that the Gross Domestic Product numbers for the second quarter were such a surprise to me that I have sent some questions to the Portugal Statistics about them. Sadly as they have not replied over a fortnight later I have assumed that they probably now will not do so.
  • Global real money growth still slowing
    The measure of global real money supply expansion followed here slowed further in July, based on data for countries with a weighting of about 60% in the aggregate. The measure peaked in April / May. Allowing for the usual half-year lead, this suggests that economic momentum will top out in October / November and begin to fade at end-2013.
  • Global labor market conditions are improving
    Recent posts have suggested that the global economy will expand solidly during the second half of 2013 although a slowdown in real money expansion in June warns that momentum could fade at year-end.
  • Is now a buying opportunity for emerging market equities?
    While emerging market economies are generally in much better health than their developed market counterparts, the same cannot be said for the region in investment terms. And if we ever needed proof that the state of an economy has little to do with market returns, the divergence in fortunes of emerging vs developed over the last three years or so is just that.
  • Follow the money
    As markets have anticipated a moderation in aggressive central bank policies and interest rates have risen, investors have redeemed substantial sums from fixed income open end mutual funds. Since the end of May, over $25 billion has been pulled from traditional, interest-rate sensitive bond funds, while over $11 billion has flowed into funds that have more flexible strategies, like absolute and total return funds, or funds that offer some protection against rising rates, like floating rate and loan funds.
  • Can the Chinese control the dangers of their own liquidity and credit squeeze?
    At the end of last week markets were understandably troubled by the implications of a “tapering” of Quantitative Easing by the US Federal Reserve. Indeed one of the consequences of this which is rising bond yields has continued this morning as prices have fallen further and the yield on the benchmark ten-year Treasury Note has reached 2.6%. Whilst is still historically low it has risen by 1% since the beginning of May. However this was not the only factor in market uncertainty as increasingly disturbing developments have been coming out of China and in particular in her monetary system where liquidity has been drying up leading to fears of a credit crunch there.
  • How is the Abenomics economic experiment going in Japan?
    Last Monday saw plenty of action in the markets of the Far East with the price of Silver falling by 7% at one point before recovering to around 4% down at US $21.40 as I type this. However if we move to my subject of today there were also wild swings in the exchange rate of the Japanese Yen which were initially triggered by these words uttered on Japanese television by economy minister Amari.
  • A “monetarist” case for UK optimism
    Rather than “flat-lining”, the British economy has been regaining momentum since late 2011. This trend is obscured in official GDP statistics by various special factors – North Sea production weakness, an extra bank holiday and the Olympics. Adjusting for their effects, the quarterly change in output has risen from -0.1% in the fourth quarter of 2011 to 0.0%, 0.1%, 0.2%, 0.2% and 0.3% in the first quarter of 2013 – a clear upward trend.
  • Japanese QE: bank bond sales may “sterilise” M3 impact
    Bank of Japan securities purchases of ¥52 trillion in 2013 are equivalent to 4.6% of the M3 broad money supply measure. Central bank bond purchases have a direct impact on broad money only if securities are purchased from domestic non-banks – their bank deposits swell as the transaction is settled.
  • UK Budget 2013: still fiddling around the edges
    The Chancellor could have chosen to be bold in this Budget, despite the weak state of the public finances. He could, for example, have announced a major review of the tax system aimed at reducing reliefs and loopholes in order to lower and smooth marginal rates. On spending, he could have relaxed the ringfencing of health, education and foreign aid to lessen damaging cuts in other departments and release funds for capital spending.
  • Russell strips Greece of developed market status
    Greece has been stripped of her developed market status and re-categorized as an emerging market by fund manager and index provider Russell.
  • Singapore – The business capital of the world?
    In the scramble to invest in emerging markets, especially in Asia where China and India dominate the investment landscape, markets such as Singapore often get overlooked. The city state is developing itself into a hub in Asia, located between the two economic juggernauts of China and India.
  • China: further monetary easing overdue
    Chinese economic prospects are improving at the margin but caution remains warranted pending additional policy relaxation and / or a further recovery in real M1 expansion.
  • Portugal’s government presses the economic self-destruct button
    Today the Portuguese government will receive the details of the latest troika (IMF,ECB,European Commission) or men in black review of their economy. There is little or no danger of them concluding that Portugal is not doing her best to hit the fiscal targets given to her as in Portugal there has been virtually no dissent. It is as if her political class has borrowed their opinion on this subject from the film The Stepford Wives.
  • Spain Moves Back onto the Economic Frontline
    On Friday in perhaps an example of the strategy of a good day to bury bad news Spain announced some changes in its position on bank bailouts. Coming around an hour or two before the keynote speech of US Federal Reserve chairman Ben Bernanke it did not get the attention it deserved except in one area. Longer dated Spanish government bonds fell in price as her ten-year yield rose by more than a quarter of a point to 6.86%.
  • Has the EU failed its original agenda?
    The EU was supposedly set up to create a closer political union between the countries in Europe after the Second World War, in an attempt to avoid a similar scenario happening again in the future. The economic union was seen as a necessity to further fortify the peaceful relationship between the countries in Europe, so the introduction of a single European currency was a vision for many years before its implementation.
  • The real cost of rising food prices
    We’ve seen a number of spikes in food prices lately and the most recent is being blamed on the worst drought in 50 years in the US. Conditions in Europe haven’t been much better and even our own soggy summer will no doubt have an impact.
  • Can Ireland escape from the bank debt burden?
    The Emerald Isle has had a rough few years to say the least as it has begun to digest the consequences of the boom and then bust which took place in her housing industry. One direct consequence was the collapse of most of her banking industry which via the too big to fail strategy of her political leadership has saddled her with large debts. A population of some 4.59 million ended up having to provide some 64 billion Euros of bailout money to her banks or just under 14,000 Euros each.
  • Japanese economic growth slows worryingly but if we compare and contrast with Greece…
    As the world’s focus turns away from London 2012 and the Olympic games that have now concluded there has been a development in one of the themes of this blog in the land of the rising sun,Japan. This was not under the category of a good day to bury bad news as the latest economic growth figures for Japan were due. However what we did see was more evidence of a building world wide economic slow down. And there are issues here for Japan herself which relate not only to her problems but to policy options for the wider world.
  • Italy on a Downwards Spiral
    The last ten days or so have seen a lot of debate about the role of one of Italy’s most prominent individual’s the President of the European Central Bank Mario Draghi. Will he save the Euro? Can he save the Euro? And so on and in some cases on and on. However whilst the ECB can help in the financial arena in terms of liquidity and interest rates in an era of broken monetary transmission mechanisms we have to face the fact that even extreme measures may only have a limited impact on the real economy.
  • What happened to the post-tsunami economic recovery promised in Japan?
    Today I wish to take a look at the land of the rising sun otherwise known as Japan. And in particular I intend to examine what has happened since the tsunami of March 2011 hit her following the Great East Japan Earthquake and the subsequent problems with the Fukushima nuclear power plant. If we step back in time to then I wrote this back on March 15th 2011.
  • Is the euro rot spreading to Germany? Is she no longer “My Perfect Cousin”?
    Because of the nature of the situation in the Euro area the situation in the periphery is often up for analysis. For example I looked at Spain’s current problems only yesterday. However if you have a periphery you also have to have a core and today I wish to look at the core nation the Federal Republic of Germany. She wears various coats for example she is the potential saviour of the Euro but often also metamorphoses into the supposed villain of the piece.
  • Are negative interest-rates and bond yields a benefit or a curse?
    One of the most intriguing developments of the credit crunch era has been the development of trends in interest rates and bond yields. It has been along the lines of the aphorism that those who have some will get more and those who have little will not. We now live in bond yield terms in what is something of a bi-polar world and it would appear that Rudyard Kipling’s phrase “never the twain shall meet” is an apt description. And in addition I am sorry to report that economists have often rushed to put their flag on one of the poles and claim that it means their theories are correct conveniently forgetting the existence of the other pole.
  • Will the London Olympics be a success for the UK economy?
    When the Olympics, or even the World Cup for that matter, are awarded to a country there is always an initial flurry of reports about how much a country will benefit from being host – that’s after the doom mongers have told us how much it is going to cost each of us.
  • The UK Monetary Policy Committee seems more worried about the banks than the real economy
    Last night the G-20 summit ended and the world’s leaders started to depart from the Mexican tourist destination of Los Cabos. As ever they issued a communique and I would like to draw your attention to this sentence in it which covers the Euro.
  • Spain’s “Victory” is in Fact a Defeat
    The weekend just gone has seen the Kingdom of Spain join the countries in the Euro area which have called for international help to deal with debt problems. As ever the first casualty of such an operation was the truth as we saw the Spanish Prime Minister Mariano Rajoy call it a “victory”. Perhaps he just said the word pyrrhic so silently that the microphones did not pick it up. Of course he also contradicted many of his most recent statements because in claiming that Spain did not need and would not take a bailout he was in his own words denying her a “victory”. Let us remind ourselves of what he said as recently as May 28th.
  • Why Ireland should vote no to the Fiscal Compact Treaty tomorrow
    Tomorrow Irish voters go to the polls to decide whether they should vote yes or no to the European Union’s Fiscal Compact Treaty. There is of course an element of fantasy to this as the vast majority of the 25 countries that signed this treaty currently have a snowballs chance in hell of actually achieving “a balanced budget”! From the Treaty itself.
  • European leaders waffle about economic growth just as even Germany sees it grind to a halt!
    Late last night or more accurately early this morning European Council President Van Rompuy gave a Press Conference to announce the progress at the latest European Union summit. After Mr. Van Rompuy had given us some euro waffle which seemed to involve mentioning the word growth as often as he could we got European Commission President Barosso who did the same. However in answer to a question President Barosso said this.
  • The UK can borrow cheaply but needs to account for all of the costs
    One of the features of the credit crunch era has been the rise in price of what are considered to be “safe haven” assets. We have seen this in currency markets for example with the rise of the Swiss Franc and the Japanese Yen which has overrun the efforts of their respective central banks to stop it. More recently we have seen in in the surge in prices in some government bond markets which allow those governments which benefit from this to borrow at what I consider to be extraordinarily low levels.
  • Mervyn King has failed- it is time for some democracy at the Bank of England
    Yesterday evening the Governor of the Bank of England gave a lecture for BBC Radio’s The Today Programme. Of course there is already an obvious weakness here as it should be Mervin King receiving a lecture for his (lack of) performance! This has been followed up by an interview on The Today Programme this morning. Governor King has repeated his usual trick of discussing matters in a broad sweep in an attempt to make himself look intelligent, magisterial and dignified. He invariably avoids detail as it is often inconvenient. You know the sort of thing, inflation which is invariably above target becomes on its way down to it. Even the casual observer has started to spot that it has supposedly been on its way down to its official target for quite some time now!
  • Spain should be singing “Help”
    Today sees the Spring Meetings for both the World Bank and the International Monetary Fund. One of the lessons of these times is that there has been an extraordinary inflation in the number of meetings between world leaders. Sadly there has also been a corresponding drop in anything useful coming from them! A major topic will be the Iberian Peninsula and in particular Spain.
  • As Spain pays nearly 6% on her benchmark bonds and the UK pays 2%, is euro membership worth that?
    The last week or so has since something of a gathering storm for Spain as two effects have coincided. Firstly the efforts of the European Central Bank to indirectly help her (some would argue directly…) have begun to wear off. The provision of over a trillion euros of three year liquidity to Europe’s banks allowed them to use some of the money to purchase sovereign bonds which offered a higher interest rate on them than the one the banks had to pay for the liquidity.
  • The UK Budget should involve the Monetary Policy Committee
    At 12:30pm today the UK Chancellor of the Exchequer George Osborne will stand up and announce his Budget plans for the next year and beyond. We are likely to see some news although there seems to have been quite a leaking operation going on as Chancellor’s like to “pull a rabbit from the hat”.
  • Mortgage rates are rising whilst the Bank of England’s Quantitative Easing is supposed to cut them
    Today I wish to return to a subject that was the second theme I established when I began this blog back in November 2009. It was that there was a developing gap between official interest-rates and the interest-rates faced by borrowers, savers and businesses which I called unofficial interest-rates. A factor in this was the lack of competition in the UK banking sector which I illustrated back on the 3rd of December 2009 with the number of building societies in the UK.
  • Currency flight from the Euro is boosting the Swiss Franc but has the Yen finally started to weaken?
    Over the past few years there has been a remarkable convergence in the performance of the Swiss Franc and the Japanese Yen. A lot of this has been due to the effects of traders reversing “Carry Trades” in each country as this feature of world economic life was carried out on an enormous scale. In addition both currencies have seen themselves regarded as “safe havens” in the credit crunch era. However recently this link has been broken and there are considerable consequences from this.
  • A Necessary Greek Devaluation and Default
    Yesterday was a day of great shame for Greece. However I wish to distinguish myself from the rolling 24 hours news coverage of the protest and the separate riot and firebombing. For me the great shame was Greece’s Parliament approving a set of austerity measures that no-one who has observed the Greek crisis so far can have any belief will actually happen. Even worse is the plain fact that whatever elements of the austerity package are implemented will only deepen Greece’s economic depression as I explained only last Monday.


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