With Fed rates likely to rise next week, and trade falling across the world, Neal Kimberley, External Forex Analyst for ActivTrades, questioned Zak Mir and Bill Hubard, Chief Economist for Bullion Capital, How are people going to pay their debts with USD credit at $9.8 trillion?
Key Points:
Kimberley noted that the ECB clearly deceived the market, but he urged that this provides Fed with wiggle room, and makes Yellen’s decision to hike interest rates in the US easier as the USD isn’t as strong against the Euro.
He continued to the BIS quarterly review, which revealed that USD credit outside the US amassed to $9.8 trillion, with $3.3 trillion to emerging markets.
With trade falling, shown recently by the declining imports and exports from China, Kimberley argued that paying debt back whilst the US tighten will become increasingly difficult for some.
In terms of the Federal Reserve’s independence from the politics, he concluded this was questionable, with Mir coming to the same answer about the Bank of England in the UK.
Moving onto Oil, Kimberley commented that lower oil prices is not giving people the incentive to drive more miles which aren’t necessary, or for businesses to use more oil to increase production for goods which there isn’t demand for.
He finished by outlining that the Saudis are playing a long-term game, and he expressed not to underestimate the role of the US in this plan.
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