Following yesterday's budget (deficit) and the 'sacrifice-the-people's-comfort-for-the-death-of-US-Shale' plan that we detailed here, it appears market concerns about Saudi Arabia's forward-looking health are rising. As Bloomberg reports, USDSAR 12-month forwards jumped 250pts (the most since December 2007) to 725bps (the highest level since March 1999) implying expectations of a looming de-pegged, devaluation.
by Keith Weiner
Most people assume that prices move as a result of changes in the money supply. Instead, let’s look at the effect of changes in interest. To start, consider a hamburger restaurant. Suppose that the average profit in the burger business is ten percent of invested capital. If MacDowell’s is thinking about expanding, it has to consider the interest rate. Why?
2015 was the year of considerable FX drawdown as desperate EM central banks attempted to rescue themselves from reality.
As Barry Eichengreen noted,
"Intervening to support an exchange rate that’s fundamentally overvalued is a fool’s game and a no-win situation, akin to a sovereign attempting to sustain an unsustainable debt burden rather than yielding to inevitable restructuring."
Moments after the Fed announced it would hike rates for the first time in 9 years on December 16, the ink on Yellen's statement was not yet dry and one after another bank announced it would hike its respective Prime rate - the benchmark rate on everything from small business loans to credit card monthly fees - from 3.25% to 3.50%.
The world’s most powerful media tycoon, Rupert Murdoch, is in the oil business nowadays. Murdoch is the founder of News Corp and Fox news who inherited his ‘news’ empire from his father. He now part owns an oil company with Lord (Jacob) Rothschild that is about to start drilling in disputed land between Israel and Syria. The Australian born American tycoon loves to promote war, chaos, fear, pleasure and nonsensical ‘talking points’ as news on his media outlets. His influence and power over politicians, and vice-versa, has always been legend.