The FT Alphaville has a fascinating blog examining the trend for distortions in long term pricing trends of commodities due to monetary easing and negative inflationary expectations. The journalists have noticed that monetary easing by the Federal Reserve has adjusted the yield curve for commodities and for the last few years encouraged holding of commodities as collateral (rather than to be used for industrial and traditional purposes). All well and good but the amount of money tied up has led to an overhang which stands to be wiped out when rates rise - which they are doing now and money moves from commodities into finanical instruments again.
Link here: http://ftalphaville.ft.com/2013/06/05/1525542/the-rise-of-the-real-collateral-mining-business/
The article explains a lot of the distortions in commodity markets and consequentially the financial markets. But it seems to raise a question - while all of the above is bad for individual entities or whole industries which suffer from commodity stockpiles, could a whole economy with a sufficient commodity weighting be at risk?
Meanwhile Aussie banks are suffering from the outflow of liquidity in the primary instance anyway - so Australia learns it is now an unpredictable emerging (resources) nmarket as far as international financiers are concerned?!
Link here: http://ftalphaville.ft.com/2013/06/05/1525542/the-rise-of-the-real-collateral-mining-business/
The article explains a lot of the distortions in commodity markets and consequentially the financial markets. But it seems to raise a question - while all of the above is bad for individual entities or whole industries which suffer from commodity stockpiles, could a whole economy with a sufficient commodity weighting be at risk?
Meanwhile Aussie banks are suffering from the outflow of liquidity in the primary instance anyway - so Australia learns it is now an unpredictable emerging (resources) nmarket as far as international financiers are concerned?!
Given that the near costless credit and liquidity the Fed, the European Central Bank and the Bank of Japan have been pumping into the global financial system has spawned a multitude of carry trades and a global search for yield, even the slightest prospect that the US might begin scaling back its quantitative easing program was likely to spark a rush for the exits from those trades. (here)
No comments:
Post a Comment