CHARLES HUGH SMITH'S
NEW SERIES RELEASE
Sultans of Swap
Extend & Pretend
Preserve & Protect
"Currency Wars "
"SULTANS OF SWAP"
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Current Thesis Advisory:
"EXTEND & PRETEND"
PDF, 62 pages
Published November 2009
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"PRESERVE & PROTECT"
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2014 THESIS: GLOBALIZATION TRAP
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OUR MACRO ANALYTIC
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F William Engdahl
OTHERS OF NOTE
HOUSTON, WE HAVE A 'FLOWS' PROBLEM!
The Taper Spigot is Now Too Tight
According to global economist Richard Duncan, since 1952 every time Total US Real Credit Growth fell below 2%, the US has experienced a recession. This correlation has been marked on 9 separate occasions. We are now below 2% and as a consequence the Federal Reserve will soon have little choice but to make a course correction in the current "Taper" monetary policy.
$2.3 TRILLION IN TOTAL US Y-o-Y CREDIT GROWTH REQUIRED
Approximately $2.3 Trillion in total Y-o-Y credit growth is required. According to Richard Duncan's very detailed tracking at Macro Watch, the Fed will be between $500 and $1T short.
PROBLEM COMPOUNDING QUICKLY
There are a number of developments that have placed the Federal Reserve and its new Chair Janet Yellen in this awkward policy quandary.
Sub 3% global growth levels have traditionally been a reliable indicator of recessionary economic troubles in the US. As 25% of the world economy, a US recession has historically been the catalyst for sub 3% world growth. Today with Emerging Markets being more than 50% of the global economy, the reverse may be a new contributing development.
SUB 3% WORLD GDP GROWTH
Another consequential development is falling foreign direct investment. FDI is now at unprecedented Bear Stearns and Lehman lows and getting worse fast!
DRAMATICALLY SLOWING US FOREIGN FLOWS
"Houston, We Have a Problem!"
The chart below, taken from a survey of 222 fund managers responsible for a collective $591 billion in assets under management conducted by BofA Merrill Lynch between Feb. 7 and Feb. 13, 2014, shows where investors think we are in the global economic cycle right now. We have overlapped it with our work and sense we are highly likely in the midst of a major inflection point.
Welcome Ms Yellen!
Like Greenspan and Bernanke when they assumed office, you will experience the most taunting challenges of your chairmanship very early in your tenure.
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