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USA reflation

In the World, World economy 9th January 2021

Reflationary Thesis Strengthens As Democrats Win Slim Senate Majority

Salman Ahmed (Fidelity International) | Georgia run-off elections on 6 January handed the Democratic party effective control of the US Senate with a slim majority that will limit the ambitions of a Biden presidency. However, this will be able to boost fiscal spending to help the economy recover from Covid-19 and grow by more than 7% in 2021. This further strengthens the reflationary thesis, but means a potential taper tantrum is top of the list of factors we are watching. 

Capitolio assault

In the World, World economy 7th January 2021

Investors Ignore The Assault On Capitol: 10-Year US Bond Yields Exceed 1% For The First Time Since March

Yesterday’s assault on the US Capitol by Trump supporters on the grounds of election fraud is an episode of violence not seen in the almost two and a half centuries of the existence of the US,” Banca March’ analysts note. What is suprising is the fact that investors ignore that “this is a direct attack on democratic institutions”, Link Securities points out.

The interests on the benchmark US bonds rose over 3% in April, for the first time since the start of 2014

In the World, World economy 23rd December 2020

Are US Treasuries Turning Japanese?

Keith Wade (Schroders) | Clearly, Japan’s debt is significantly higher than the US’. However, it is stable rather than rising. This reflects the poor position of US government finances before Covid-19, where the budget deficit was running at 6.3% of GDP at a time when the economy was doing well with unemployment at less than 4%, a 50-year low. (In net terms the comparison is less stark with Japan at 180% GDP versus 114% in the US).

Fed Powell

In the World, World economy 14th December 2020

USA, Banana Republic: Its Economy In The Hands Of The Fed

Pablo Pardo (Washington) | The catastrophe following the elections, with president Donald Trump refusing to admit electoral defeat and practically the entire Republican Party supporting him, has confirmed the US is almost a developing country but without malaria. With the US in a political situation of underdevelopment, the management of the economy until Trump leaves the White House, passes to the Federal Reserve. In principle, this is on the outside of political disputes.

THE INFLATONARY SUPPLY OF UNBACKED US DOLLARS AND THE PRICE OF GOLD

In the World, World economy 21st November 2020

Why Does The US Benefit From A Dollar That Isn’t Tied To The Value Of A Glittery Hunk Of Metal?

Michael Klein via The Conversation | Going back to a gold standard would create new problems. For example, the price of gold moves around a lot. A year ago an ounce of gold cost $1,457. The pandemic helped drive up the price by 40% to $2,049 in August. As of Nov. 18, it was about $1,885. Clearly, it would be destabilizing if the dollar were pegged to gold when its prices swings wildly. Exchange rates between major currencies are typically much more stable. 

10.dividends schroders

World economy 18th November 2020

An Overall Decrease In Dividends Per Share Of Between 16% And 36% Is Expected In 2020

Sean MarKowicz (Schroders) | The economic fallout of Covid-19 has wreaked havoc for income-seeking investors. Across the globe, interest rates have tumbled to record lows and equity dividends have been drastically cut.For example, this year dividends per share are expected to fall by 16% to 36% across the globe compared with 2019, with the UK and emerging markets (EM) among the worst affected regions. This has left investors nursing losses from normally dependable sources of income. 

Biden wins celebrations

World politics 10th November 2020

Biden Wins – Experts On What It Means For Race Relations, US Foreign Policy And The Supreme Court

The Conversation | The American public has had its say and for the first time in a generation denied a sitting president a second term. President’s Trump’s tenure lasted just four years, but in that time he dragged policy on an array of key issues in a dramatic new direction. Joe Biden’s victory presents an opportunity to reset the White House agenda and put it on a different course. Three scholars discuss what a Biden presidency may have in store in three key areas: race, the Supreme Court and foreign policy.

Biden Trump Battle

Relevant News Item 5th November 2020

Biden Gains Advantage, Trump Doesn’t Give Up… The Court Battle Is Guaranteed

The election count is continuing and the chances of the Democrat candidate reaching the White House are increasing. Although with a much tighter result than the polls predicted, Joe Biden wins in the key states of Wisconsin and Michigan, as well as being ahead in Arizona and Nevada. The latest recount gives Biden 264 and Trump 214. Despite the result, Donald Trump is announcing he will file several complaints in these key states, demanding new recounts and threatening to go to the Supreme Court.