Turkey Default Risk Spikes to 2008-2009 Crisis Levels; Possible Contagion, Warns Russell Napier

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Source: Bloomberg, Financial Sense® Wealth Management. Past performance is no guarantee of future results.

 

All focus is on Turkey right now as their currency goes into freefall and 5-year credit default swaps (insurance against default) have now spiked to levels last seen during the 2008-2009 financial crisis. Continue reading

Russell Napier: “Trade War Is The Beginning Of A New Global Monetary System”

A Country Matures, An Exchange Rate Declines

After two weeks on the road visiting clients your analyst returns with a better view of the consensus outlook. There is, though, much in the consensus to disagree with. In particular it seems peculiar that the consensus believes the democratically elected government of Italy, with policies entirely contrary to EU membership, will be put through the bureaucratic meat grinder in Rome and Brussels and turned into EU sausage, in a similar process that minced the political representatives of Greece.

While this might well be the case, it is hard to understand that the grinding destruction of this democracy, even if it is only moderate compared to the Greek experience, can be anything but bad for growth and asset prices in the EU. Disciplining these politicians to abandon their manifesto promises and follow the ways of the EU is highly unlikely to be a painless experience, either for Italy or the rest of the EU. Nonetheless, investors are content to believe that a painless disciplining of Italy’s elected representatives is all but inevitable. We shall see.

Perhaps the most prevailing consensus view is that the recent weakness of the RMB represents a Chinese counter-punch in the trade war with the US. Coming when it does, it is easy to see the accelerated decline of the RMB as a tactical and not a strategic move. Comments by the PBOC on July 3rd have probably reassured many investors that the managed exchange rate regime is not at risk and that the RMB will continue to be managed against a basket of currencies. Your analyst does not agree. Continue reading

Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking

From Russell Napier of ERI-C

It’s Not a Pet, It’s a Falcon: How the decline of the RMB destroys belief in central banking and a successful reflation

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;

– The Second Coming- W.B. Yeats

First catch your falcon, as the formidable Mrs Beeton might have said if she was in need of a method of catching her main course (see Mrs Beeton’s Book of Household Management 1861- ‘Recipe for Jugged Hare’). Continue reading