Deflation in EM's

[Thailandnotes]

Kind of got a wake up call recently when a retired friend who lives here in Thailand, but who keeps most of his money in the US, told me he had saved almost 1,000$ by delaying a knee replacement for four months.

David Cay Johnston...

http://america.aljazeera.com/opinion...deflation.html

[jk]

Re: Deflation in EM's

Kind of got a wake up call recently when a retired friend who lives here in Thailand, but who keeps most of his money in the US, told me he had saved almost 1,000$ by delaying a knee replacement for four months.

David Cay Johnston...

http://america.aljazeera.com/opinion...deflation.html

makes it hard for the fed to raise rates and drive the dollar still higher.

[touchring]

Re: Deflation in EM's

makes it hard for the fed to raise rates and drive the dollar still higher.

With all the QT in EM, it's hard to imagine the Fed will raise rates.

[ProdigyofZen]

Re: Deflation in EM's

makes it hard for the fed to raise rates and drive the dollar still higher.

The Fed is an elephant stomping around the world with no regard for what is in its path. I lay the blame at their feet for the ransacking of antiquities in the near east starting in 2011 due to their QE programs driving food inflation through the roof in those countries.

The current US domestic monetary policy action has been diverging from the rest of the world since 2014 and they are no longer supplying much needed dollars which is causing global tightening at the exact wrong time for EME countries.

Look out below.

[Bundi]

Re: Deflation in EM's

Thanks PoZ, very interesting to contemplate.

I think that I can conceive of, at least generally, some of the issues at play regarding fund flows and the limitations they may impose on balance sheets.

Also, I can get my head around the “process” context a lot more readily than an abrupt unforeseen crash event. A process implies causes, effects, evolutions, repositioning, etc…

I suppose that if China (EMs) were to have a Peso problem the world would, through various feedbacks and interconnections, also have a sizeable problem. I imagine this is not a desirable outcome for most of the systemically relevant political agendas swirling about. Do you feel that the political/economic calculus has changed?

To the degree we can draw parallels to the Asian Tiger devaluation era and/or the AFC era, maybe we can also hypothesize as to the likely interventions that may be employed to stave off this type of crisis.

While some things have changed (US hydrocarbon extraction levels, Fed balance sheet, China miracle has lost some luster, etc…) since the prior processes, I continue to expect that the likely outcome is more propping up of the weak spots, possibly through more opaque channels or maybe highly transparent channels but without the same degree of advance notification and context.

Of course none of the above would rule out a host of specific asset price moves as things proceed. At least in the shorter term even if more broadly things are “stabilized” over time.

[ProdigyofZen]

Re: Deflation in EM's

I suppose that if China (EMs) were to have a Peso problem the world would, through various feedbacks and interconnections, also have a sizeable problem. I imagine this is not a desirable outcome for most of the systemically relevant political agendas swirling about. Do you feel that the political/economic calculus has changed?

We will find out the answer to this next week. If the Fed raises rates, the political calculus has changed.

Even with the Feds new macroprudential policy, they have stated the entire time that the dollar is not their problem.

Curiously emerging market central bankers are urging the Fed to raise rates.

[Bundi]

Re: Deflation in EM's

We will find out the answer to this next week. If the Fed raises rates, the political calculus has changed.

Even with the Feds new macroprudential policy, they have stated the entire time that the dollar is not their problem.

Curiously emerging market central bankers are urging the Fed to raise rates.

Thanks PoZ for the link. I think Finster would also be interested in that line of thinking.

Next week will be informative, agreed.

A few observations and questions.

There are other possibly more relevant metrics that would be important to consider but I am fishing for a direction on thinking about the Fed decision. Unlike the Fed, which no doubt is clear headed on this.

1. One year ago, 9-10-14, the SP500 closed at 1,996. It closed yesterday, 9-9-15, at 1,942.

2. One year ago, 9-11-14, the WTI spot price was $92.68, yesterday, 9-9-15 it was $44.10.

3. ~One year ago, 9-14, the US Crude Field Production of Crude Oil (000s of barrels) was 268,813, as of June 2015 it was 278,894 (reached a recent era peak of 296,586 in March 2015 and had been 173,630 in March of 2011 when WTI was $101.40).

4. ~One year ago, 9-14 Consumer Price Index for All Urban Consumers: All Items stood at 237.626 for July 2015 it was 238.099 or +0.2% yoy.

5. One year ago, 9-10-14, the UST 10 year rate was 2.53 . On 9-9-15 it was 2.18.

If the Fed raises, even by a tenth or two tenths, anyone care to forecast where these metrics may be on 9-10-2016? Or better yet, where might they be in 6 months when theoretically the Fed assesses its next move onthe long term rate increase progression?

I will guess that all of them will be lower in 6 months’ time from the date of any degree of interest rate hike by the US Federal Reserve.

Maybe a rate raise program now would be somehow akin to anearly 1980s of sorts geopolitically driven approach.

I am not at all convinced of that but it is aninteresting thought.