Today's most anticipated event at tthis year's Jackson Hole event was the panel on "Global Inflation Dynamics", not because there is any core inflation in the world (at least not in the way the CPI measures it), especially not now that China is finally in the deflation exporting business, but because the most important speaker at this year's Jackson Hole, Fed vice chairman Stanley Fischer, alongside BOE's Mark Carney, the ECB's Constancio and the RBI's Raguram Rajan, would comment. Moments ago he just did, and courtesy of Market News, here are the highlights.
Late last year, Saudi Arabia "Plaxico'd" itself and the petrodollar when, in an effort to "preserve market share" and bankrupt US shale producers, the kingdom endeavored to purposefully suppress crude prices. Nine months and billions in liquidated FX reserves later, Saudi Arabia is facing a budget crisis of epic proportions.
You know what they say: when it rains it pours, especially when you’re the poster child for an epic emerging market unwind and you’re suffering through the worst inflation-growth outcome in over a decade while trying to combat dual deficits and ward off political and social upheaval.
It appears the economy is doing just well enough and the reflexive bounce in stocks showing that everything is awesome is all that Fed's vice chair Stan Fischer appeared to need to note that "we are heading [a September rate hike]direction." This has been judged as "not dovish enough" and sparked some turmoil...
- Global Stocks Struggle to Shrug Off China Fears (WSJ)
- Brief Respite Ends for European Stocks Amid Renewed Retreat (BBG)
- Stock futures rise after China injects $21.8 billion (Reuters)
- China turmoil needn't rattle BOJ, yen rise not a worry: Abe adviser (Reuters)
- Stock-Market Tumult Exposes Flaws in Modern Markets (WSJ)
- Dollar gains as stocks recover, lessens safe-haven bid for yen (Reuters)
For Saudi Arabia, The Music Just Stopped: Scramble To Slash Spending Begins As Oil Math Reveals Dire PictureSubmitted by Tyler Durden on 08/25/2015 17:20 -0400
With declining crude revenues clashing head on with the cost of simultaneously financing the state while intervening militarily in Yemen, the Saudis are looking to tap the bond market (a move which could increase debt-to-GDP by a factor of 10 by the end of next year) and some are speculating that the riyal’s dollar peg could ultimately prove unsustainable. Now, as Bloomberg reports, "Saudi Arabia is seeking to cut billions of dollars from next year’s budget because of the slump in crude prices."
Over the weeks, months, and years ahead we’ll begin to understand more about the fallout from the death of the petrodollar and nowhere is it likely to be more apparent than in Saudi Arabia where widening fiscal and current account deficits have forced the Saudis to tap the bond market to mitigate the FX drawdown that's fueling speculation about the viability of the dollar peg. As Bloomberg reports, the current situation mirrors a "very scary moment" in Saudi Arabia’s history.
Last week, in the global currency war’s latest escalation, Kazakhstan instituted a free float for the tenge causing the currency to immediately plunge by some 25%. The rationale behind the move was clear enough. What might not be as clear is how recent events in developing economy FX markets stem from a seismic shift we began discussing late last year - namely, the death of the petrodollar system which has served to underwrite decades of dollar dominance and was, until recently, a fixture of the post-war global economic order.
... and the ECB printing presses!
In simple terms, Greece from 2003-2010 was an economic boom driven by incomes, which were in turn driven by cheap debt NOT real organic growth. Thus, the collapse in GDP was yet another case of “price discovery” in which asset prices fall to economic realities…
Low oil prices and the battle against Islamic State (IS) are pushing Iraq toward a financial crisis. Only fundamental reforms, especially decentralization of power, can resolve the challenges facing Iraq today.
Why I've come to thinking that Kyle Bass' short JGB premise may well be wrong
And how you will be paying for her 'exit party' bill...
Junk-rated Chicago is paying nearly 8% to issue debt these days and although the city's fiscal woes are set to persist, some asset managers are taking the plunge ahead of a key court ruling scheduled for Friday.
Over the last 5 years, rent costs in the city of Oakland have doubled. At $2,807 per month it more expensive to live in Oakland now than it was in SanFrancisco in 2012, so one would expect the city to have 'cleaned up', and 'be safer'? However, as SFGate reports, the city laid off 80 officers today to help eliminate a $30.5 million budget deficit, prompting the department to announce that officers would no longer be dispatched to take reports for most nonviolent crimes. "With current levels of staffing, we are unable to respond to many lower-priority calls," said Officer Jeff Thomason, a police spokesman.