• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Budget Deficit

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"You Lie" - Fact-Checking Obama's SOTU Job "Gains" Claims





President Barack Obama’s final State of the Union address came up short of the facts on several topics. Obama apparently omitted part of his presidency in boasting of nearly 900,000 manufacturing jobs “in the past six years.” Over his entire time in office, manufacturing jobs have gone down by 230,000.

 
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Devaluation Odds Spike To Record Highs As Market Bets Saudi Dollar Peg Will Fall





Apparently, the market isn't buying the notion that a Saudi Aramco IPO will be enough to shore up Riyadh's fiscal fiasco...

 
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China's Hard Landing To Trigger Meltdown In India: "We Will See Another Crisis"





The collapse of China's economy will have serious implications for India, the country's top investment banker warns. With exports in free fall and the government caught between fiscal retrenchment and the need to keep the economy afloat, it could be a rough year for the country Goldman swears will be a top economic performer in 2016.

 
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Saudi Aramco Confirms "World's Most Valuable Company" May Go Public





"Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and/or the listing of a bundle its downstream subsidiaries."

 
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Trader Psychology Is Reversing, Scotiabank Warns Market Is "Ripe For Volatility Spikes"





Market psychology established in recent years is reversing. Market volatility is rising and will remain pervasive for a while as psychology, the change in direction of Fed policy, and the increases in general uncertainties, will all conspire to shape an environment ripe for sharp spikes in volatility which will be further amplified by rickety market liquidity.

 
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Saudi Default, Devaluation Odds Spike As Mid-East Careens Into Chaos





On the heels of a tumultuous weekend that saw Saudi Arabia cut diplomatic ties with Iran after the Saudi embassy was torched by protesters angry at the execution of a prominent Shiite cleric, CDS spreads for the kingdom have blown out to six-year wides while the implied odds of the riyal peg finally breaking are hitting new record highs.

 
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The Bail-Ins Are Back! Portugal Slaps Senior Bank Bondholders With €2 Billion Loss





If you are an institutional investor and you bought Novo Banco bonds, you just had a bad morning...

 
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Oil Slumps As Saudis "Won't Change" Policy, Russia Rethinks 2016 Price Forecast





“We will satisfy the demand of our customers. We no longer limit production. If there is demand, we will respond. We have the capacity to respond to demand," Saudi oil minister Ali al-Naimi told reporters on Wednesday, underscoring the kingdom's belligerent stance as "lower for longer" heads into 2016. Meanwhile, Russia's Finance Ministry may reconsider its forecast for $50/bbl crude, a move which could inflate Moscow's budget deficit.

 
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The Russian Economy Is Cracking, "Social Unrest" Coming In "A Few Months", Official Warns





As the ruble plunges to record lows against the dollar, we take a close look at the outlook for inflation and GDP growth in 2016 in the context of The Kremlin's budget, which assumes $50/bbl crude. We also ask whether the deficit - expected to balloon to 4.4% of GDP in the event oil hovers around $35/bbl - will grow as a result of a planned bailout for insolvent state lender VEB. 

 
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Frontrunning: December 29





  • The World's Richest People Got Poorer This Year (BBG)
  • Oil hovers near 11-year lows on abundant supply, slowing demand (Reuters)
  • Oil-Producing States Battered as Tax-Gushing Wells Are Shut Down (BBG)
  • A Bold Few Traders Earn Billions Flouting Rivals (WSJ)
  • Islamic State ruling aims to settle who can have sex with female slaves (Reuters)
  • Winter Storm Snarls Republican Presidential Traffic (BBG)
  • Donald Trump Urges Supporters to the Polls (BBG)
 
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Something Just Snapped In Saudi Arabia





Following yesterday's budget (deficit) and the 'sacrifice-the-people's-comfort-for-the-death-of-US-Shale' plan that we detailed here, it appears market concerns about Saudi Arabia's forward-looking health are rising. As Bloomberg reports, USDSAR 12-month forwards jumped 250pts (the most since December 2007) to 725bps (the highest level since March 1999) implying expectations of a looming de-pegged, devaluation. Perhaps just as worrying is this is the same pattern that played out in August as Yuan weakness sparked HIBOR stress, leading to SAR forward weakness and then US equity market collapse.

 
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Saudis Boost Gas Prices by 40%, Dismantle Welfare State To Wage War With U.S. Shale





In a bid to shore up its finances in the face of self-inflicted oil wounds, Saudi Arabia is shaking up the welfare state by raising prices on everything from domestic fuel to water. Apparently, persisting in the war of attrition against the US shale complex is paramount - even if it means making life harder for everyday Saudis so the monarchy can buy itself some budget breathing room.

 
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More Bad News For Oil: Saudis Are Handling Crude Crash Better Than Expected





Saudi Arabia has released its official budget numbers for 2015 as well as projections for next year. As it turns out, Riyadh is weathering the storm better than analysts expected, meaning the war of attrition with US producers is likely to continue for the foreseeable future, meaning "lower for longer" oil prices and even more shale defaults in the future.

 
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Frontrunning: December 23





  • Oil up after U.S. crude stocks drop, still close to 11-year lows (Reuters)
  • Global Stocks Rally; Mining, Metals Shares Lead Gains (WSJ)
  • OPEC Sees Demand for Its Crude Oil Falling for Rest of Decade (BBG)
  • The Trouble With Sovereign-Wealth Funds (WSJ)
  • U.S. Calls for 256% Tariff on Imports of Steel From China (BBG)
  • Iraqi troops expected to drive ISIS from Ramadi in days (Reuters)
 
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