In financial circles, it is widely acknowledged that the Federal Reserve was about to raise interest rates, but has since changed course and decided to hold firm. Why? Because currencies are tanking all across the globe, and a stronger U.S. dollar – a double-edged sword – is making export goods more expensive and hurting international business. Welcome to 2015, the year of the currency wars. Things are about to get volatile, so hold on. Wall Street bears are warning that a crisis is near, according to CNN Money:
The bears build their case that a crisis is near [based] on four factors: falling oil prices, stagnant wages, the “two-edged sword” of a strong US dollar and big trouble abroad.
“Earnings and economic activity are actually weakening, not strengthening,” says James Abate, chief investment officer at Centre Asset Management, which manages over $8 billion. “The growth outlook, to us, is deteriorating.”
Only a short time ago, the Swiss decoupled from the Euro, signalling trouble ahead and sending markets spiraling. Now Greece is back in debt trouble, and several other European nations are vulnerable. This will spread further. The damage could be severe, depending upon what plays out.
Growth in China is slowing. The Swiss National Bank ignited a “currency war” this month after a surprise move. The European Central Bank is throwing a life raft to its nations drowning in deflation, and Japan is already deflating.
On top of that, Greece just elected a leader almost certain to cause tension with other European leaders and tensions are flaring up again between Russia and the Ukraine.
“Everyone seems to be falling or faltering in some way,” abroad, says Matt Kerkhoff, research director at Dow Theory Letters, an online newsletter. The American economy, “cannot really outperform while all the rest are in shambles.”
Remember, everything is, and has been for decades, interconnected. As SHTF quoted earlier this week,
“At a basic level, all markets are increasingly integrated — if Wall Street sneezes, New Zealand is likely to catch a financial cold.”
Now it figures that if Wall Street catches the flu, the world might catch the plague. And so, Federal Reserve monetary policy is hinging on international conditions during a time of stormy seas. Cue Russia, Mexico, Brazil and OPEC nations being tested by devastatingly low oil prices. Right now, the Mexican Peso and Brazilian Real are at the tipping point, with the peso at its lowest point since 2009 and the real at the lowest point in 10 years! Meanwhile, economic experts are debating whether or not the euro can still be saved, or is doomed to collapse as European states are internalizing control of their economies and repatriating gold to weather the storm should the entire continent be consumed in the swell. More