G-20, IMF, Chris Whalen, & Bill Gross: No Economic Recovery in Sight. QE Is Actually Driving Deflation Now. Sell Euros!
Last weekend’s meetings of the International Monetary Fund and the G-20 saw further calls for policies to stimulate global economic growth. There were no concrete measures advanced to implement such a program, however, amid deepening divisions among the major powers.
While the discussions were not characterised by the air of crisis that accompanied some recent meetings, they were nonetheless dominated by the realisation that there is no economic recovery in sight and, instead, a deepening trend of stagnation and slump.
Fears of an immediate financial crisis had receded somewhat, but there were growing concerns that the policies of “quantitative easing” pursued by the major central banks could produce one in the near future.
The G-20 communiqué claimed that while progress had been made, “much more is needed to fulfil our commitment to address the ongoing weakness in the global economy.”
To make matters worse, the Fed’s extended ultra low rate policy is hurting savers, as “QE is actually driving deflation now because we’ve gotten past the point where cheap funds are net-net helpful… because we’re constraining consumption,” Whalen says. “There was a time when QE in terms of the net effects early on was a benefit… but now we’re at the point where QE is really starting to hurt savers particularly, and I think that’s a drag on the economy.”
Since regulation is here to stay, Whalen advocates that the Fed hike rates up a bit in the short term in order to get assets repriced from such low rates, which would help banks, investors and retirees who depend on interest income. It will take time to get housing, and thus the economy, back to normal, though.
“We’ve put so much friction in the system, to expect a classical recovery is almost unreasonable,” Whalen concludes.
In his increasingly ubiquitous manner, the bond king has reduced his thesis to 140 characters, summed up in just two words… Sell Euros
Gross: Expect an ECB cut soon but will it lead to real growth? Doubtful. Euro needs to go down. Sell Euro.
— PIMCO (@PIMCO) April 23, 2013
It seems sometimes there is no need for a 300-page Powerpoint presentation.
As if on cue, a day after my expose on Anglo Irish Bank and its shenanigans (see Global Banking Crisis – How & Why YOU Will Get “Cyprus’d” As This Bank Scrambled For Capital!!!), The Irish Business Post announces senior bondholders will get wiped out. That’s right, a 100% loss! Zilch! Zero! Nada! Now, that’s investing. That’s getting “Cyprus’d”, plus some!!!
This is actually MUCH WORSE than the deal the Cypriots got. These Irish pensioners are facing a total wipeout – 100% LOSS!!!
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