GEAB N°77: Finance, The Economy, Politics And The World Situation At The End of 2013 – 3 Sparks And A Powder Keg!
- GEAB N°77 is available! Finance, the economy, politics and the world situation at the end of 2013: 3 sparks and a powder keg!
by http://www.leap2020.eu/
The 2013 summer sun, far from having brought the lull for which some hoped, has continued to heat finance, the economy, and especially global geopolitics white hot. The Syrian apple of discord has shown the extent to which the international community was no longer one; the economic news, despite all the tricks possible, stubbornly refuses to announce a long awaited recovery; currency wars have flared up again, hitting the emerging countries head-on; sovereign bond interest rates are now out of control…
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Unfortunately, the coming autumn will not calm things down. The end of the political summer break is, in fact, under pressure in Washington between discussions on Syria, the budget vote, the debt ceiling, etc. The extreme divisions between Democrats and Republicans makes this period full of danger. The end of the financial summer break is no less so with the famous tapering on the agenda, that’s to say the progressive reduction of the Fed’s programme of Quantitative Easing which deals with the economy single-handedly; with the aftermath of Detroit’s bankruptcy; and with the major Western banks withdrawing their support of the US government of necessity.
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Finally, the end of the geopolitical summer break also promises to be eventful itself: the emerging countries, scalded by speculation in their currencies, certainly aren’t going to sit idly by, which promises a real firework display in the foreign exchange markets and, in addition, they will wish to take advantage of their victory on Syria to increase their powers. Layout of the full article:
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1. The political soap opera begins again in Washington
2. The Fed loses control
3. The next Cyprus will be American
4. The banks have given up the Treasure
5. The great Syrian bluff
6. Between Scylla and Charibdis
7. Loss of US influence
8. Emerging countries: the final instalment of the decoupling process from Western economies
9. Japan: regional realignment
10. Europe at the crossroads
11. The drunken boat of world governance
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This public announcement contains sections 1, 2 and 3
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The political soap opera begins again in Washington
We had almost forgotten the differences between Democrats and Republicans whilst there has been so much international news. But those interested in the twists and turns of the series “alert in Washington” will be kept in suspense for many more weeks (1).
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Between the discussions on Syria (now without any stakes but reflecting the Western summer gamble as we will see), the 2014 budget and the debt ceiling, the Republicans will use all their blocking power to extract maximum concessions from Obama. And it goes without saying that they are ready to fight to the finish, either by sacrificing reform of the US healthcare system or slashing other social spending (or, better, both) (2).
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Clearly, with the dangers posed by the absence of an agreement on these issues (3), no doubt a last-minute compromise will be found or, more likely, a few hours or days after the deadline. This compromise will increase the pressure further on the millions of Americans who depend on government benefits (4).
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Nevertheless, the spectacle of a United States torn apart which we will be offered is a new body blow to the country’s credibility, an additional useless nervousness on the markets, an unwelcome game played on foreign creditors’ nerves and China first of all. This will be the cacophony too far which will put an end to the shaky confidence in what remains of the world’s leading power. And without confidence, the country loses everything that keeps it alive.
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Unfortunately, the GEAB readers know that this is the home straight of the United States’ inevitable deterioration in influence, which we will discuss later since it is essential reading to understand world developments which are underway.
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In short, in the coming months US politics is the first of the three sparks capable of lighting the fuse connected to the powder keg of the global economy which hasn’t yet completely cut the umbilical cord with Uncle Sam.
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The Fed loses control
Worse, as we have repeatedly announced, US Treasury bond interest rates are now out of control. In spite of the $45 billion dollars’ worth of US public debt purchased by the Fed every month, in spite of a reduced Treasury bond issuance thanks to a reduction in the federal administration’s budget deficit, interest rates continue to rise.
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If it were just a question of rumours of a reduction in QE3 then, first, they would have begun their rise after that, which isn’t the case; secondly, that a rumour of a 10% reduction in QE3 will cause more than a 1 percentage point rise in the 10 year bond interest rate does not bode well for what will happen when the Fed stops its support completely.
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