Juggling Dynamite

Good New Year look ahead piece yesterday from the UK Telegraph’s Ambrose Evans-Pritchard. See: Trump, interest rates and Chinese panic: Why euphoria could turn to credit crunch in 2017.  Here is a taste, but worth reading the whole thing:

Donald Trump’s reflation rally will short-circuit.  Rising borrowing costs will blow fuses across the world before fiscal stimulus arrives, if it in fact arrives. By the end of 2017 it will be clear that nothing has changed for the better.

Powerful deflationary forces retain an invisible grip over the global Bond yields will ratchet up further and then come clattering down again – ultimately driving 10-year US yields below zero before the decade is over…

Once markets accept that Trump is not bluffing – that he really does intend to smash globalism – euphoria will give way to alarm. For now Wall Street remains drunk on wishful thinking. The longer the delusion lasts, the stronger the dollar, and the greater the trouble in Asia and Latin America.

(For those who do not subscribe to the Telegraph and cannot view the story directly, a copy is available here through John Mauldin’s site today.)

2017 is set up to be a breathtaking year to be sure.  Political risks are one thing, but more importantly at this point, capital/financial downside risks have rarely ever been higher.  Happy New Year!

Available in February this new book is a must read.  Misguided thinking and policies have caused so much harm.  There can be no recovery, unless we admit, repent and reform our banking system.

An insider’s unflinching expose of the toxic culture within the Federal Reserve.
 
In the early 2000s, as a Wall Street escapee writing a financial column for the Dallas Morning News. Booth attracted attention for her bold criticism of the Fed’s low interest rate policies and her cautionary warnings about the bubbly housing market. Nobody was more surprised than she when the folks at the Dallas Federal Reserve invited her aboard. Figuring she could have more of an impact on Fed policies from the inside, she accepted the call to duty and rose to be one of Dallas Fed president Richard Fisher’s closest advisors.
 
To her dismay, the culture at the Fed–and its leadership–were not just ignorant of the brewing financial crisis, but indifferent to its very possibility. They interpreted their job of keeping the economy going to mean keeping Wall Street afloat at the expense of the American taxpayer. But bad Fed policy created unaffordable housing, skewed incentives, rampant corporate financial engineering, stagnant wages, an exodus from the labor force, and skyrocketing student debt. Booth observed firsthand how the Fed abdicated its responsibility to the American people both before and after the financial crisis–and how nobody within the Fed seems to have learned or changed from the experience.
 
Today, the Federal Reserve is still controlled by 1,000 PhD economists and run by an unelected West Coast radical with no direct business experience. The Fed continues to enable Congress to grow our nation’s ballooning debt and avoid making hard choices, despite the high psychological and monetary costs. And our addiction to the “heroin” of low interest rates is pushing our economy towards yet another collapse.

“China’s balancing act isn’t getting any easier.

Policy makers are grappling with how to attack excessive borrowing and rein in soaring property prices while maintaining rapid growth. They’re also battling yuan depreciation and capital outflow pressures as U.S. interest rates rise, while on the horizon looms the risk of confrontation with America’s President-elect Donald Trump on trade…”

See China Fault Lines: where economic turbulence could erupt in 2017.  Here is a direct video link.