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Real Interest Rates

May 7, 2012

[EDIT: For up-to-date real interest rate charts see here.]
 
Here we present a consolidated view of real rates around the globe. As usual real interest rates in the perpetually-monetizing West are in deep negative territory (although be warned that they’re moving strongly higher at present). In contrast, real rates in Japan and the Czech. Republic are deteriorating rapidly.

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Russell Napier (renown financial historian and consultant for CLSA) has articulated some fantastic insights on the generational cycle, bear market bottoms and currencies in recent years. So for this reason we decided to compile a ‘Russell Napier’s Greatest Hits’ video for you to enjoy. See below for the video and summary.

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Behold, after a near-tripling in the total size of the Fed’s balance sheet over just three years, it seems that the monopoly producers of the world’s base currency have finally decided to act in a pseudo-responsible fashion. Although the Fed continues the reality-denying folly of attempting to fix prices in the realm of the production of IOU claims upon central bank notes (ZIRP), at least it’s trying to cease the outright monetary debasement that we’ve all become accustomed to (i.e. central bank balance sheet expansions). Here I outline the implications of a nominally ‘responsible’ (ahem!) Federal Reserve and outline our thoughts on the manner in which the inevitable U-turn back to monetary profligacy might come to pass.

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[EDIT: For up-to-date real interest rate charts see here.]
 
Real interest rates in the West remain in deep negative territory whereas many countries in the so-called ‘Developing world’ have real interest rates that seem to be headed higher. See below for our monthly global interest rate charts (now with local currency gold prices plotted alongside).

 

[Note: By ‘real‘ interest rates, we mean the short-term inter-bank rate minus the year-on-year growth in the consumer price index.] continue reading »

It’s October again, and…. uh oh…. the deflation monster seems to be on his way! Here I present a chart that represents sentiment pertaining to the inflation vs deflation debate.

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Over recent months we’ve noticed that the public sector has been making attempts to ‘clean up’ its balance sheet (however half-hearted those attempts may have been). The Fed in particular has been engaged in increasing the degree to which the Federal Reserve note is ‘good for’ the pseudo-traditional central banking asset of the long-term US government security. First it was by the mechanism of QE2, second it was by selling the junk accumulated over the past few years and buying the long-end of the national debt, and now, with the news coming out over the past few days it it will be via the alteration of the maturity of the Fed’s assets. They’re ‘sticking to the plan’ (as we have maintained over recent weeks), the question is only; what kind of price action will induce the resumption of indulgently debauched monetary policies of 2007/2008? Here I present the usual Federal Reserve balance sheet charts.

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