Links – 29/03/07

Credit Crunch(kitcocasey)

The Fed is scared about what may lie ahead, and as a result is fighting the risk of a credit and liquidity crunch. We are afraid that printing money when market forces suggest a recession is overdue may have dire consequences. The rise of gold and the fall of the dollar are issuing strong warning signals that the Fed is veering into uncharted territory, a territory that would be labeled off limits if it were on a ski slope.

Resilient US ecomomy(Indy)

Yet for me, the more remarkable feature of the US economy is its continued strength and resilience, rather than any signs of a slowdown to come. That there could have been a monetary tightening of the scale just experienced without thus far much more severe consequences for growth and confidence is truly astonishing.

Carry trade exit(FT)

The yen rose sharply and high-yielding currencies came under pressure yesterday as rumours of a military incident involving Iran and the US rattled investor confidence. Analysts said the resulting rise in risk aversion had led investors to exit carry trades. The likely beneficiaries of rising tension in the region would be safe-haven currencies such as the Swiss franc, oil- dependent currencies such as the Canadian dollar and Norwegian krone and possibly the yen, if the carry trade came under further pressure, said David Woo of Barclays Capital Markets.

Market Correction (FT)

The recent market turmoil should not have been un­expected. We are living in an increasingly interdependent world. Times have been good, even with the volatility of the past few weeks sparked by the Shanghai market and then fuelled by the subprime sector in the US. We have been living in extraordinary times in a global “Goldilocks” economy – not too hot, not too cold. The macro-economy still looks pretty good but the shaking of the trees over the past few weeks has, it is to be hoped, awakened investors and lenders to the risks in the marketplace.

Engines of Inflation!(kitco)

Central banks are the engines of inflation. Whether it is the Federal Reserve in the US or the Bank of England in the UK, the sole purpose of these institutions is to inflate. At the same time, they understate the ongoing inflation problem and manage the public’s fears. Therefore, in order to protect your wealth in this era of constant inflation, it is absolutely essential that you properly define and understand inflation. In other words, you need to distinguish between “cause” and “effect”. (Great minds think alike!)

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