Author: Gold Macro Page 15 of 18

Market open this morning doesn’t seem to reflect the promise of endless 3% growth in the US minus the inflation. The perfect scenario, we were told sold over the weekend by former Goldman Investment Banker, Film Producer and current US Treasury Secretary, Steve Mnuchin.

He (net wealth $300m) certainly doesn’t seem concerned with endless trillion dollar deficits, sky high equity valuations and through the roof debt in the face of rising rates and shrinking central bank liquidity.

Nine years of Central Banks “fixing” the last central bank created debt and derivative bubble by creating more epic bubbles in has produced some spectacular scenes for his next movie.

The funding of epic billion-dollar red ink generators like Tesla and Netflix has not been a problem, so far.

This period “easy money” for some was summed nicely by Grant Williams’ take on the now not so recent USD700 million capital raising from “Wework”.

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Well, we can finally see where rising interest rates and inflation have taken their toll – emerging markets. Down 20% since mid May.

We can guess there’s probably some worried US Fed bankers right now. Worried that this turmoil will reach US equity market shores very soon.

So, it seems the only point for debate is whether they wait for this to happen and “suck up” a garden variety market correction, or not wait and roll back the quantative tightening/interest rate hikes immediately.

There can be no doubt that it will be the latter. Too much systemic risk to do nothing, a fact which can be seen clearly in the chart below. US Fed tightening usually ends up with an event.

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How quickly the news cycles turn… This time last week, geopolitical instability in the Middle East was of primary concern.

Now, after another US/UK/France (no Germany) “Mission accomplished” we move to the next big “thing”, and we’re still no closer to piping gas through Syria, from Qatar, to Europe.

Despite the US trade and hot war “victories”, financial markets continue to wobble up and down in a manner we’ve not seen in many years.

One thing is for sure, there is no wobble in the rising pace of US government debt levels.

Straight up and, in our view, worth keeping an eye on from time to time.

Like, in the last 6 months to end of March, US government debt rose by 1 TRILLION dollars, to 21 TRILLION. The 18 TRILLION ceiling of a couple of years ago looks a long way back in the rear-view mirror.

For the month of February, said debt rose by $215 BILLION, about the size of the New Zealand economy.

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