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Gordon Long

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Mr. Long is a former senior group executive with IBM & Motorola, a principle in a high tech public start-up and founder of a private…

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Ty Andros

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Global Currencies - Asia Crisis II

Part II - Euro, Yen, Asia & Emerging Markets

Global Currencies - Asia Crisis II

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

Yen Cartoon

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!

Debt Matters


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.

Asian Debt Levels versus Developed World

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.

Currency Cartoon

 


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