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After The Monetary Binge: What?

The latest edition of our finance and property news digest with a distinctively Australian flavour.

In this week’s market review, consider the hangover coming as the punch bowl of cheap funds is taken away. We start as always with the US, go across Europe and Asia, and end in Australia. Why, because like it our not our fate will be largely determined by what happens in the US – which drives the price of money via the US dollar, and China, our main export partner.

The US FOMC raised interest rates in June by 75 basis points in June. And last month, the U.S. central bank also started reducing the size of its enormous balance sheet. Until September, the Fed will be cutting $45 billion a month from its massive holdings, and it will increase to $95 billion, almost twice as much as it did in the previous episode of quantitative tightening. So the value of the Fed’s assets has already peaked, reaching $8.95 trillion in mid-May 2022.

But, although the Fed is tightening its monetary policy, its stance remains accommodative. According to the Taylor rule, the federal funds rate shouldn’t be just between 1.50% and 1.75%, but at least above 5% .

So the U.S. central bank remains behind the inflation curve and would have to raise interest rates much further to combat high inflation. But in the previous Fed’s tightening cycle of 2017-2019 which led to the repo crisis, forced the U.S. central bank to reverse its stance and cut interest rates.

Given how fragile the financial system is and how much indebted the American economy is, it’s almost certain that the current monetary policy tightening will lead to a sovereign-debt crisis or another kind of financial crisis.

[CONTENT]

0:00 Start
0:15 Introduction
00:46 Removing The Punch Bowel
2:45 US Dollar
4:00 Economic Indicators
5:45 US Markets
08:00 Bonds
8:50 European Markets
10:25 Oil and Gold
12:40 Asian Markets
14:00 China Economics
15:30 China Property Bust
19:25 Australian Market
22:00 Crypto Crash
23:00 Conclusion

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Written by Walk The World

Comments

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  1. Nothing in economics deals with Absolutes. How high? How high is not an absolute magnitude, but a relative one. High enough to end inflation, that’s how high Mr. North. Sovereign debt crisis? What do you think collapses first, inflation or the post war international monetary order? Just think about it. What dies first? Your cabbage believes in Absolutes, bastardises a book from a prominent Australian Keynesian, and conjures an utterly incoherent ‘scenario’ that preys in the insecurities of a fragile middle class. Your’e not much better either.

    Could we be devastated by US monetary policy? Hell yes. But Armageddon? That is shameful to present to a public who were gullible and stupid enough to buy houses at the ridiculous prices that we have seen recently.

    Otherwise, quite a well paced presentation Mr. North. Be seeing you in September.

  2. So far, there's still signs of this keeping going.
    Retail sales on the trend line for 2038;
    16 billion dollar trade surplus for May (a record high);
    3.5% unemployment – a 40 year low.

  3. Australia needs to sell it’s resources in Australian dollars, to support demand for our currency, and maintain value against the USD and other currencies

    The US maintains hegemony by controlling trade in US dollars

    Britain controlled the sale of India’s goods and services in a similar way during the Raj to maintain the Empire

  4. Martin, I'd really like to see you make a video showing the difference between USA & Australia in the way they each calculate their inflation rate which AFAIK is different. For example (AFAIK) Australia excludes (or at least skewes) quite a few major expenses like housing, energy, etc. Also what changes each country has made over the years in the way they calculate it. Love your videos BTW.

  5. 28.5% clearance rate in Victoria. Some of the ones selling are still selling for absurd figures. Bring on another 150 basis points of rate hikes please Dr Phil.

  6. Hi ,I crawl out from under my rock. Look around, Things still Shit, n More Polluted!, Bad Environment! Bad Economy, Energy Crisis, Diseases, Wars! n On an On! Best I crawl back under My Rock n hide few more years? else Buy a Ticket on on Elon M ,Space X to Mars for a Future? Ha Ha!. This is a Crap Place! an Time! Ahhh! Thanks Martin U Informative Content as Always!

  7. In China buyers of new property don't pay a deposit, they pay the whole amount upfront. They might take a loan from whatever Chinese bank and start paying off the loan immediately. Some Chinese banks have taken on bad loans and subsequently halted people's access to their deposits. These depositors have stopped paying their loans back to these banks. Crazy times in China.

  8. BTY, My Rock is Metals, N Gold n Silver ,all Earth dirived metals n Minerals! after all its created All Civilisation an Energy! since we crawl out! stick with it, Please even the Aeomeba need it!.HaHa! damb even spell check cant get single cell animal right???

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