Trade Deficit

testosteronepit's picture

The Socialist Heart Of France Spits Out Its First Victim





Nationalizations and protectionism have run into a buzz saw.

 
Marc To Market's picture

Currency Positioning and Technical Outlook: Stirred by not Shaken





 

We have been tracking the deterioration of the US dollar's technical tone over the past three weeks.  That ended abruptly.  Weak euro area data, a more dovish than expected ECB, and heightened political uncertainty in Italy, saw the euro reverse lower after briefly moving above an eighteen month-old downtrend.   

 

The UK also cut its growth outlook, and poor data increases the likelihood that the BOE  may have to resume its gilt purchases in the new year, though consumer inflation expectations have ticked up recently.  

 

At the same time, there appears to be little progress on the US fiscal talks.  Whenever a top official signals this, the dollar seems to tick up on risk-off considerations, though with diminishing impact.  The stronger than expected November employment data is not sufficient to stay the Fed's hand and the FOMC will most likely expand the long-term assets purchased under QE3+ at its meeting that concludes on December 12.

 

 
Marc To Market's picture

Dollar Stays Bid: Take Five





The US dollar extended yesterday's gains and remain bid ahead of the November jobs report.   The deterioration of the economic and political situation in the euro area appears to be the single biggest factor behind the greenback's sharp recovery.   The dollar is little changed against the yen as the market grapples with the implication of the earthquake and tsunami.  

 

Asian equity markets were mostly higher with the MSCI Asia-Pacific Index was up about 0.25% and,. of note, the Shanghai Composite extended this week's recovery, gaining 1.6% to bring the weekly advance to 4.1%.  European bourses are bit heavier.    Spanish and Italian bonds remain under pressures, while Greek bond yields continue to fall as a the bond buy back offer expires today and the market anticipates a successful conclusion.  

 

We share five observations today. 

 
Marc To Market's picture

FX Churns, Waiting for Fresh Incentives





A consolidative tone threatening to emerging in the foreign exchange market, as prices churn awaiting not only today's press conference following the ECB meeting, but also tomorrow's US employment data and prospects for an expansion of QE3+ at next week's FOMC meeting. 

 

Five major central banks were to meet this week, with only the Reserve Bank of Australia poised to act.  They did cut rates, but the accompanying statement did not tip the hand of the next move.  The market took advantage of the jobs data's favorable optics to reduce the likelihood of a follow up cut in February to about 50/50.  

 

The details of the employment report were really weaker than it appeared.  The 13.9k increase in jobs is misleading as it was driven exclusively by part-time jobs.  Full time work actually fell 4.2k, the first decline in four months.  The unexpected decline in the unemployment rate to 5.2% from 5.4% in Sept and Oct was a function of a decline in the participation rate.  The Australian dollar has traded now (barely) on both sides of yesterday's range.  Offers in the $1.05 area continue to slow the Aussie's ascent.

 
Tyler Durden's picture

Goodbye Petrodollar, Hello Agri-Dollar?





When it comes to firmly established, currency-for-commodity, self reinforcing systems in the past century of human history, nothing comes close to the petrodollar: it is safe to say that few things have shaped the face of the modern world and defined the reserve currency as much as the $2.3 trillion/year energy exports denominated exclusively in US dollars (although recent confirmations of previously inconceivable exclusions such as Turkey's oil-for-gold trade with Iran are increasingly putting the petrodollar status quo under the microscope). But that is the past, and with rapid changes in modern technology and extraction efficiency, leading to such offshoots are renewable and shale, the days of the petrodollar "as defined" may be over. So what new trade regime may be the dominant one for the next several decades? According to some, for now mostly overheard whispering in the hallways, the primary commodity imbalance that will shape the face of global trade in the coming years is not that of energy, but that of food, driven by constantly rising food prices due to a fragmented supply-side unable to catch up with increasing demand, one in which China will play a dominant role but not due to its commodity extraction and/or processing supremacy, but the contrary: due to its soaring deficit for agricultural products, and in which such legacy trade deficit culprits as the US will suddenly enjoy a huge advantage in both trade and geopolitical terms. Coming soon: the agri-dollar.

 
Tyler Durden's picture

Guest Post: The Unadulterated Gold Standard Part 2





In Part I, we looked at the period prior to and during the time of what we now call the Classical Gold Standard.  It should be underscored that it worked pretty darned well.  Under this standard, the United States produced more wealth at a faster pace than any other country before, or since. In Part II we focus on the Post-1913 (Fed to Nixon) era and the fact that - for many reasons, politicians felt that a quasi-government agency could make better credit decisions than the market. This regime was unstable, as economists such as Jacques Rueff and Robert Triffin realized. Since then, it has become obvious that without the anchor of gold, the monetary system is un-tethered, unbounded, and unhinged.  Capital is being destroyed at an exponentially accelerating rate, and this can be seen by exponentially rising debt that can never be repaid, a falling interest rate, and numerous other phenomena.

 

 
Tyler Durden's picture

Guest Post: Understanding the "Exorbitant Privilege" of the U.S. Dollar





The dollar rises for the same reason gold and grain rise: scarcity and demand. Which is easier to export: manufactured goods that require shipping ore and oil halfway around the world, smelting the ore into steel and turning the oil into plastics, laboriously fabricating real products and then shipping the finished manufactured goods to the U.S. where fierce pricing competition strips away much of the premium/profit? Or electronically printing money and exchanging it for real products, steel, oil, etc.? I think we can safely say that creating money out of thin air and "exporting" that is much easier than actually mining, extracting or manufacturing real goods. This astonishing exchange of conjured money for real goods is the heart of the "exorbitant privilege" that accrues to the issuer of the global reserve currency (U.S. dollar). To understand the reserve currency, we must understand Triffin's Paradox.

 
Tyler Durden's picture

Daily US Opening News And Market Re-Cap: November 12





Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately,  analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.

 
Tyler Durden's picture

Guest Post: Trade Deficit - Increase In Exports To Be Short Lived





The U.S. trade balance in September improved, largely on petroleum, with a rebound in exports.  This was good news for a single economic data point and it sent mainstream economists to mistakenly begin boosting third quarter GDP estimates to 2.9% from the 1st estimate of 2.0% that we saw last month. The important point is that the trend of exports, and imports, has been negative as the recession in Europe, and slowdown in China, have reduced end demand. There are a numer of reasons that the recent positive boosts to the trade deficit data are more likely temporary in nature and will be revised away in the months ahead.  "Regardless of when the NBER officially announces the start date of the next recession - the damage will have already been done to investors."

 
Tyler Durden's picture

Daily US Opening News And Market Re-Cap: November 9





Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately, analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.

 
Tyler Durden's picture

Gold And Silver Worth $1.4 Billion Carried In Baggage From Turkey To Iran, UAE And Middle East in September





Turkey’s trade deficit has been shrinking and the country has enjoyed the best bond rally in the emerging markets this year due in part to the contributions of airline passengers transporting gold in their baggage. Statistics from Istanbul’s 2 main airports show $1.4 billion of precious metals were registered for export in September.  Iran is Turkey’s largest oil supplier and Turkey has been paying for the oil not only with liras but also with gold bullion. Turkey exported $11.7 billion of gold and precious metals since March, when Iran was barred from the Society for Worldwide Interbank Financial Telecommunication, (Swift) making it nearly impossible for Iran to complete large international fund transfers. Of the $11.7 billion, $10.2 billion or 90% was to Iran and the United Arab Emirates, according to data on Turkey’s state statistics agency’s website. Turkey’s current account deficit is second in the world at $77.1 billion or 10% of GDP while the US currently holds the top spot.   The problem with Turkey switching from a net importer to a net exporter of gold bullion this year is that the foreign trade data is misrepresented. Turkey’s use of precious metals is a key factor to help turn around its nation’s current junk bond rating status.

 
Tyler Durden's picture

Meanwhile In Japan...





Two of the saving features that allowed Japan to internalize 30-some years of failed fiscal and monetary policy (and yes, not one, not two, but now 8 failed iterations of quantitative easing) and to offset one relentless deflationary vortex was i) its demographics coupled with an investing culture that favors deposits and bonds over equities, which incentivized its aging population to invest its savings into government bonds, and ii) its trade surplus which led to foreign capital flows to enter the country. Well, as far as i) is concerned, Japan may have reached its demographic limit, since as reported several months ago, Japan's pension funds are now not only selling JGBs to meet redemption and cash needs, but forced to do truly stupid things like investing in the riskiest of assets to generate a return at any cost. In other words, demographics will no longer be a natural source of demand for deficit funds. As for ii), well... here is what has happened with Japan's trade surplus status in recent weeks following the collapse in the country's foreign relationship with China.

 
Tyler Durden's picture

Guest Post: Merkollande Becomes Merde





The most important alliance within the EU, the one that has ultimately defined the union's course over the past few decades, is the French-German axis. It appears that this is no longer the case. The once so strong friendship is in danger of fraying ever since the socialist Francois Hollande has become president of France. Not only was he elected on an 'anti austerity' platform (disguised as a 'pro growth' agenda, which is of course one of the most laughable misrepresentations ever),  it has turned out that his big-brother, anti-free market socialist agenda wasn't merely an electoral ploy to differentiate himself from Sarkozy. He actually means it. One thing is certain: the markets have not yet fully assimilated what is going on here.

 
Tyler Durden's picture

How Iran Evades The Western Blockade: The Turkey-Dubai-Iran PetroGold Triangle





In recent months there has been a lot of incorrect speculation that because Iran has been shut off from the petrodollar, SWIFT-mediated regime, its economy will implode as the country has no access to the all important greenback and can thus not conduct international trade - the driving factor behind the international sanctions that seek to topple the local government as Iran dies an economic death. And while there have been bouts of substantial inflation, which so far the local government appears to have managed to put a lid on by curbing gray market speculation, Iran continues to more or less operate on its merry ways with international trade most certainly taking place, especially with China, Russia and India as main trading partners. "How is this possible" those who support the Western-led embargo of all Iranian trade will ask? Simple - gold. Because while Iran may have no access to dollars, it has ample access to gold. This in itself is not new - we have reported in the past that Iran has imported substantial amounts of gold from Turkey, despite the Turkish government's stern denials. Today, courtesy of Reuters, we learn precisely what the 21st century equivalent of the Great Silk Road looks like, and just how effective Iran has been as a lab rat in escaping the great petrodollar experiment, from which conventional wisdom tells us there is no escape. Presenting: petrogold.

 
Tyler Durden's picture

Guest Post: Trade Deficit - Recession Risks Increase





The recent trade report does not provide much support for the economic and stock market bulls. As we have stated many times - the current fundamental and economic backdrops are not supportive of higher asset prices at current levels.  However, while the market may advance due to the injections of liquidity into the financial system - it doesn't make it a "healthy" market. The outlook, and ultimately actions taken, by businesses are driven by demand for their products, goods and services.  Unfortunately the Fed's bond buying program does not impact these core issues.

 
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