Inflation or Deflation…. 1923 or 1932?

TechTicker talk to Todd Harrison about the deflation or inflation question, many commentators have felt that inflation will be the true risk but that it is on the horizon for now and for that reason isn’t receiving enough attention, Gold is tenaciously holding the $900 dollar mark (give or take some volatility either side of that), and the truth likely lies somewhere in the middle. This video is worth a watch, it puts some interesting ideas into the debate.

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Bank of England cut rate from 2% to 1.5% the lowest since 1694

Only a two days ago I wrote about the Bank of England considering a move to the lowest interest rate in the history of their central bank. They are now at a point of getting close to what is a ZIRP (Zero Interest Rate Policy). In essence, compared to the history of the Banks interest rates this is almost the equivalent of zero interest as they moved their interest rate down by 50 basis points from 2% to 1.5%

The USA is now at their lowest interest rate ever, UK is the same, Bank of Japan are at what amounts to a ZIRP (for the last 20 years almost!), and that means there is little choice but for the ECB to follow suit. The question is how much and how soon? Next weeks meeting will likely bring a …

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Deflation or Inflation? What to expect in 2010

We have felt for quite some time that the risk of deflation will be met by monetary and fiscal stimulation to the point where it will give rise to several strong years of inflation. This extract is by James Grant of ‘Grants Interest Rate Observer‘. The question of ‘when’ the scales will tip in favour of inflation away from deflation is likely to be at some point in 2010.

This is why we are letting our clients know that we are watching the long term bond yields and when we see a divergence either in short to long or medium term to long we will be encouraging people to consider a longer term fixed rate. When the five year and one year cross that might be a good time, meanwhile, because more rate cuts are expected in 09′ it would not be the time yet for this kind of move.

We don’t have a crystal ball but we are keeping our eye on the bond market so that we can try to gauge …

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Marginal costs explained

In Economics there is the idea of ‘costs’ of doing something, the cost creating a certain number of widgets is generally the ‘average cost’, additional units of production are created at ‘marginal cost’. This video is a simple one that aims to explain this using apples as the example of benefits/costs. etc. enjoy!

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The fallout of the credit crunch

In this post we will examine some of the likely fallout from the credit crunch. What we have seen developing in the world has shown that the international aspects of finance as well as the magnification of leverage are at the root of many of the problems. There has never been a more exciting time to be alive in the finance industry and while some pundits cite the Great Depression in every second sentence I believe that while the numbers and percentages might thwart every record hit, that the actual real economy fallout will not rival that of the Depression era.

Regulation: Regulation is likely to feature much more heavily in business, in particular in financial services, last week Patrick Neary called on all Stockbrokers to give the Financial Regulator an audit of their firms, they can do the audit themselves but they must get it done ASAP in order to demonstrate that client funds are fully protected.

In the mortgage and personal finance field we are likely to see increased regulation, …

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Currency markets Q4 of 2008

In the last few weeks we have seen some of the most volatile currency markets in history. Iceland (Króna) as a nation basically went bankrupt, there are serious currency risks in Hungary (the Forint), the Ukraine (the Hryvnia) and several other countries.

The downside is that this may be the prelude to a currency crisis not unlike that which we saw in Asia in the late 90’s. The move has been playing out in the markets at a time when most of us are concentrating on the Credit Crunch/Liquidity Crisis. The dollar was as low as $1.60 to the Euro and $2.10 to Sterling, then it snapped back to $1.25 and $1.60 respectively.

The Australian and Kiwi Dollars both got hammered, Iceland was next in line then the South African Rand and Polish Zloty took a beating. The South Korean Won and then the Hungarian Forint suffered, the Czech Republic Koruna is facing issues and the Mexican Peso is …

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