Part II - Euro, Yen, Asia & Emerging Markets
With Special Guest Axel Merk
President & CIO Merk Investments,
Manager of Merk Funds
& Gordon T Long & Ty Andros
36 Minutes, 56 Slides
In Part II of this 70 minute, two part series, Axel Merk in discussions with
Ty Andros and Gordon T Long, covers a broad range of the most important Global
Currency issues relevant to investors.
Biggest Global Risk
Axel Merk believes the world is becoming less stable. This means investors
must become more active. Gone are the days of passive 'mom & pop' investors
and instead are being replaced by aggressive monetary and quant. market drivers.
It is presently therefore critically important to realize that:
"The biggest risk to the world is that the current economic and monetary
policies will work and we get economic growth. If this happens, bonds
will plunge, interest rates will rise and governments will be unable
to finance their debts!"
This realization is one of the hidden underlying drivers now impacting global
currencies and driving increasing volatility.
Currency: Yen
Nowhere is the dysfunctional policy actions of politicians more evident than
in Japan. The largest debtor in the world is now dramatically 'doubling down'
with its "ABE-nomics"policies. As perilous as the Japanese economic policies
are, with Japan having a negative current account balance position, its DEBT
NOW MATTERS. Until recently, it hasn't!
Currency: Asian Tigers
The currency shock waves of instability and volatility that are washing ashore
across Asia are reminiscent of the Asia Crisis of 1997-1998. Because of a
combination of flexible exchange rates, strong international reserves, better
monetary regimes, and a shift away from foreign-currency debt, the shock
is better able to be absorbed. However, years of political paralysis and
postponed structural reforms have created vulnerabilities.
Interest rate risk has now come to the forefront. Axel Merk believes bond
market volatility will persist. The free ride for emerging economies is over,
and those with negative current accounts will feel the pain the most.
Currency: Emerging Markets
The "Faulty Five" of India, Indonesia, Brazil, South Africa and Turkey are
experiencing the worst impacts. Three of these are part of the touted investor
haven of the BRICS. Capital controls loom but as was begrudgingly acknowledged
at the recent Jackson Hole Monetary conference:
The choice is this: Impose capital controls OR let the Fed run your economy.
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