Deflation is accelerating across the developed world
Imported Deflation Visualized
Emerging Market Currencies and U.S. Inflation Expectations:
We are importing Deflation, they are importing Inflation
Surveying the landscape of collapsing bond yields, there is a very clear delineation between countries whose bond yields are heading to zero or negative, versus those countries whose bond yields are now rising.
Developed nation bond yields are collapsing while Third World and Developing nation currency-adjusted bond yields are rising. The reason for that bifurcation is because the developed nations are ALL printing money in one shape or another either via QE programs or via 0% (ZIRP) which keeps short-term interest rates pinned down by daily Central Bank ("open") market intervention. The ability to monetize debt without generating inflation, was always predicated upon wage deflation and high existing levels of debt i.e. the marginal propensity for middle class borrowing post-2008, is negative...
How Can We Continue Printing So Much Money?
The key factor in this equation right now, are currency exchange rates. The nascent reversal of carry trades has put a floor under the $USD, JPY, Swiss France, and next the Euro. Whereas, the developing nations which have been the net beneficiary of 0% carry flow for six years are seeing their currencies fall, as the flow reverses. That means that deflation is pouring into developed nations via stronger currencies whereas INFLATION is pouring into the Third World via weaker currencies. The secondary factor of course is the flow of cheap goods that puts constant downward pressure on developed world wages. And the third factor are the massive developed world debt loads reminding us that we already spent the future and the future is "Now".
Jan. 1, 2015 The Telegraph
"Emerging markets are a much bigger part of the world economy today, and their combined debt ratio is a record 175pc of GDP"
The locus of near-term risk in this equation are the developing nations which do not have the ability to print money without generating hyperinflation. Therefore they have high and rising currency-adjusted debt costs, combined with high and rising price levels combined with fixed or rising fiscal budgets. Add in the collapse in commodity prices which makes up the bulk of these countries' exports, and it's a recipe for implosion a la 1997 Asian Currency Crisis x100.
Current 10 year yields for a cross-section of countries:
Brazil: 11.97%
Colombia: 6.50%
Egypt: 14.65%
Pakistan: 9.79%
Russia: 13.90%
Denmark: .39%
Finland: .35%
France: .54%
U.S.: 1.63%
The one exception to all of this of course is Greece, which no longer trades like a Euro-zone nation, with a 3-yr bond at 18%:
Deflation is Accelerating
This massive bifurcation in bond yields shows the stark delineation between haves and have nots and the inherent imbalanced unequal clusterfuck that is Globalization.
Deflation is Accelerating
This massive bifurcation in bond yields shows the stark delineation between haves and have nots and the inherent imbalanced unequal clusterfuck that is Globalization.
These low interest rates "enjoyed" by developed nations are the red flag that our inflated lifestyle is being deflated by Third World poverty, the end result being *free* debt until this all implodes with extreme dislocation.
*Free* money like *free* trade, is a Faustian Bargain.
Nothing in life is free. A lesson that will be learned the hard way.
Nothing in life is free. A lesson that will be learned the hard way.
