Category Archives: CURRENCIES






The IMF annual Research Conference  commencing today brings together the world’s leading  economists and policymakers as contributors and participants.

Olivier Blanchard, the former IMF Chief Economist being honoured at the conference, played a key role in addressing and demystifying unconventional monetary and macroeconomic challenges for policy makers,  economists and the rest of us.

Key messages from the conference will be discussed further on this blog.



Extracts from Donald Tusk’s speech 13/10/1016

” The threat today is that of the disintegration of Europe, in a political and ideological sense… It is no coincidence that very often those who question liberal democracy are the same ones who call for the break-up of the European Union. It is not surprising, since the Union is not only a political organisation which restricts national egoisms and eliminates violence as a basis for relations between countries, it is also a unique territory of freedom…

…Finally, let’s move on to Brexit.

…”As for the negotiations, the situation is pretty clear. Its framework will be set out by the European Council – that is by the guidelines foreseen in the Treaty. Our task will be to protect the interests of the EU as a whole and the interests of each of the 27 member states. And also to stick unconditionally to the Treaty rules and fundamental values. By this I mean, inter alia, the conditions for access to the single market with all four freedoms. There will be no compromises in this regard.

“When it comes to the essence of Brexit, it was largely defined in the UK during the referendum campaign. We all remember the promises, which culminated in the demand to “take back control”. Namely the “liberation” from European jurisdiction, a “no” to the freedom of movement or further contributions to the EU budget. This approach has definitive consequences, both for the position of the UK government and for the whole process of negotiations.

“Regardless of magic spells, this means a de facto will to radically loosen relations with the EU, something that goes by the name of “hard Brexit”.

“This scenario will in the first instance be painful for Britons. In fact, the words uttered by one of the leading campaigners for Brexit and proponents of the “cake philosophy” was pure illusion: that one can have the EU cake and eat it too. To all who believe in it, I propose a simple experiment. Buy a cake, eat it, and see if it is still there on the plate.

“The brutal truth is that Brexit will be a loss for all of us. There will be no cakes on the table. For anyone. There will be only salt and vinegar. If you ask me if there is any alternative to this bad scenario, I would like to tell you that yes, there is. And I think it is useless to speculate about “soft Brexit” because of all the reasons I’ve mentioned. These would be purely theoretical speculations. In my opinion, the only real alternative to a “hard Brexit” is “no Brexit”. Even if today hardly anyone believes in such a possibility. We will conduct the negotiations in good faith, defend the interests of the EU 27, minimise the costs and seek the best possible deal for all. But as I have said before, I am afraid that no such outcome exists that will benefit either side. Of course it is and can only be for the UK to assess the outcome of the negotiations and determine if Brexit is really in their interest. ..



“Financial Times/Bruegel European Forum:

Three months after the results of the UK referendum there is still a lot of uncertainty about the future. The Financial Times and Bruegel bring together a panel to discuss the most crucial questions.”



Lionel Barber FT Editor      Guntram Wolff Bruegel Director

James Blitz FT Editor           Sylvie Goulard  MEP 


“Lionel Barber expressed the view that the Brexit vote was not a vote against globalization in general although direction and the rhetoric in UK politics have changed dramatically against it. James Blitz argued that Brexit supporters underestimate the extent of reduction in trade a hard Brexit would entail and overestimate the degree and speed with which trade deals with third countries can compensate for it. Sylvie Goulard emphasized that any future arrangement with the UK would have to fully respect each of the four freedoms of the EU. She added that the discussion is not specific to Britain, but pertains to a more general debate about the desirable degree of openness in society. She finally wondered whether domestic policy failures and the introduction of the euro contributed to the course of events. Guntram Wolff took the view that the future deal should strike the balance between preserving favourable outcomes for the citizens and respecting each side’s political principles. He agreed on the importance of EU-UK trade for both parties, and thus spoke in favour of maintaining the deep integration of goods and services markets, while reaching a compromise on free movement of workers with the UK, outside of the EU.

“In his second intervention, Lionel Barber drew the context for Theresa May’s recent speech at the Conservative Party Conference. He argued that she intended to address Brexit voters’ anxieties and pointed at her tenure as Home Secretary makes her sensitive on security and immigration. Barber concluded that, while whether globalization has peaked in Britain is an open question, certain aspects of it will not be complete. James Blitz agreed that domestic policy shortcomings contributed to the referendum result, adding that May’s post-referendum response has been to advocate a strong state to address them. The problem he sees is an intrinsic contradiction between that domestic policy vision and the strategy currently pursued, which is limiting the economic resources a strong state would require. Sylvie Goulard also supported the need for a balanced solution but insisted that supranational jurisdiction over the single market should remain a precondition for participation. Guntram Wolff, in turn, made two final points; firstly, he raised the prospect of policy dumping should the UK becomes estranged from the EU. Secondly, he argued that the depreciation of the pound should be seem as a correction, whereby the financial sector is shrinking, driving down the value of the currency and, thus, making British industry more competitive.”


Keynes on The Economic Consequences of the Peace:
“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

“By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.”


Chart £ – $

Chart of exchange rate values over time

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The rapid transition in the UK  with the appointment of Theresa May as Prime Minister following the resignation of David Cameron has led to a welcome turnaround in UK business activity and sentiment with   support  from the the Bank of England

Prime Minister May has made it clear Brexit means Brexit. But it will be months and may be even years before we know what Brexit actually means.

This blog was launched to support work I have been doing  addressing the unconventional monetary policies adopted by central banks since the global financial crisis erupted in 2008.  A key element of the book is identifying reliable and accessible information resources for ordinary  investors in extraordinary times.  Markit is an important resource.

Previous postings on this blog have suggested keeping gold on the agenda for consideration when asset allocation decisions are being made.  A weaker currency is good for exporters but not for savers.


Less Than Six Weeks After Britain Voted to Leave, The Consequences Are Already Being Felt

Link to Markit Reports & Comments:

“UK construction activity fell sharply for a second successive month in July, pointing to an ongoing impact of Brexit-related worries.

The Markit/CIPS Construction PMI edged lower from 46.0 in June to 45.9 in July, signalling a rate of decline not seen since June 2009:

While the June data has mainly reflected business activity prior to the June 23rd referendum, the July data were collected between 12th and 28th July inclusive.

“Just 15% of firms reported higher activity in July against 23% reporting a decline.

The poor start to the third quarter deals a further blow to a sector that was already in recession in the second quarter and has been greatly underperforming the rest of the economy, according to official data.”


COMMENT  Chuka Umunna MP, Chair of Vote Leave Watch

“During the EU referendum campaign, the Vote Leave campaign repeatedly reassured the British people that a vote for Brexit would boost the economy and create jobs. And they dismissed all expert warnings of the consequences of a vote to leave – from the Bank of England, IMF, Treasury and others.

But Monday has seen just the latest in a series of shockingly bad economic numbers. It’s less than six weeks since Britain voted to leave, but already the consequences are being felt. The Markit PMI survey of manufacturers, which picks up data every month on output, orders, employment and other metrics, has collapsed into negative territory. Falling from 52.4 to 48.1, it is now at its lowest level for four years.

What does this rather dry statistic really mean? It means lower revenue for firms as orders dry up. It means small businesses being forced into the red. It means jobs being lost and investment postponed or cancelled in a desperate attempt to save money. It means real people, workers and business-owners alike, being worse off.

And it’s hardly the only piece of evidence that the Leave vote has drastically hit the economy. The pound has plunged to its lowest level since the mid 1980s, before many voters were even alive. Confidence among both consumers and retailers is now lower than it’s been since the height of the Great Recession in 2009. And big companies like Ford and Ryanair are mulling their investment positions in Britain.

I campaigned passionately for Britain to remain in the EU, and was deeply disappointed by the result. Yet I respect it totally, and I hope now that Britain can avoid economic damage, and get the best deal possible from the EU. We Remain campaigners take absolutely no pleasure in being the bearers of bad news.

Yet it’s vital that the Leave campaigners are held to account for the promises and claims they made during the referendum campaign. Senior cabinet ministers, from Boris Johnson and Andrea Leadsom to David Davis and Priti Patel, promised greater prosperity outside of Europe, and blithely brushed off every warning about the consequences. These people aren’t running some scrappy political campaign – they’re running the country. They have to be held to account, and that is what Vote Leave Watch, the campaign I chair, is doing.

There is a tragic irony that it is manufacturing that seems so clearly to be bearing the brunt of the Brexit vote. Theresa May entered Downing Street promising a “comprehensive industrial strategy”, which would shift the economy towards productive manufacturing, and rebalance the country by boosting manufacturing heartlands in the North, the Midlands, Wales and Scotland. I applaud the intention, though we are yet to see much in the way of specifics.

The irony is that the part of the economy the new Prime Minister wants to champion is the very sector that has apparently been badly hit by the vote for Brexit. While she earnestly reassures the nation about her commitment to an industrial strategy, her government is packed full with Leave campaigners who have made that strategy immensely more difficult to carry out.”




Facts vs Opinions

I set out  to provide useful information for investors with an ongoing comparison of different fact based  analysis published on  Brexit issues.    However,  as the debate has progressed, all  independent fact based economic analysis published has warned on a  recession, rising interest rates,   currency depreciation, falling economic growth  and loss of the dominance of the City of London as a financial hub  for Europe if Britain votes for Brexit.

Notwithstanding these warnings  Brexiteers  have  some valid arguments.   The most potent is that while Britain is obliged to keep open doors for all EU citizens at all times it will be impossible to have control  over levels of immigration.

Rather than providing fact based analysis  Brexiteers tend to  rubbish all the fact based analysis that doesn’t support their contentions – claiming all the forecasters with conclusions  contrary to theirs have made  some mistakes in the past, This contention is naive.

 The vocal Brexiteers have not supported their case  with fact based information on their own track records as forecasters that  would support their conclusions.   Nor have they they provided  information  on their formal qualifications as economists or their experience in marketing.

Hedging against the  intended and unintended Brexit Referendum Consequences

The  23rd June Referendum will have consequences for everyone – some  intended and some unintended.The International Economy Magazine have published a valuable symposium of views  from 30 well informed and qualified commentators with essential information on the unintended consequences of Brexit

The Bruegel Think Tank and others have also published well supported comment on the risks of Brexit to the dominant position of London as a financial centre – an outcome that could have serious negative implications for the British economy.

Hedging Against Brexit Financial Risks

Investors should take steps to hedge  against  possible adverse outcomes after the  Referendum on June 23rd.

Gold should be on the discussion agenda  when advice is sought from   financial advisers on suitable hedging strategies.


Note added 11th March 2016:

Jose Vinales  Director of thw IMF’s Monetary and Capital markets department supports negative interest rates introduced by some central banks “given the significant risks we see to the outlook for growth and inflation”  Link to article in IMF Direct

Why are central banks using negative policy rates?

Once policy rates are cut to what used to be known as the ‘zero lower bound’, central banks can employ unconventional monetary policy measures to provide further stimulus if real interest rates are still above the levels consistent with price stability and full employment. Negative nominal policy interest rates are the latest addition to this unconventional toolkit. Six central banks so far have introduced negative rates that apply to some amount of the cash balances commercial banks hold with the central bank (Table 1).  Negative rates aim to encourage the private sector to spend more and support price stability by further easing monetary and financial conditions. For smaller open economies, negative rates can also help discourage capital inflows and reduce exchange rate appreciation pressures.

Rev Table 1 with new Sweedish Bank Date


Reposted by John Katz from The Goldwatcher

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Are Central Banks Pushing on a string?

In the first west week of January I posted this Goldwatcher note

 “Gold is insurance against the unexpected and the unthinkable. Gold is  poised to breach the psychologically and technically important $1100 threshold…Gold pundits like to punt gold demand as coming from fear or love trades. But they ignore the more important trade trades  – i.e. the speculative punts that  can account for most the money flowing in and out of gold”

The global risk landscape this time last year was fairly tame  and I posted several comments on gold price prospects for the year that proved to be useful.  The landscape this year has been different and recent posts on gold have included  Ray Dalio on Central Banks Risk Pushing on a string 

Messages from The Goldwatcher Book:


The manuscript for The Goldwatcher was submitted to the publisher, at the end of 2007. At the time the gold price was a little over $800 – about double the where it was when I first submitted the book proposal to Wiley.

 The Goldwatcher (Page 186)    included this comment under the heading

Messages From History

.”…Pundits had been calling for the Gold Price to reach $850, the level it spiked to in 1980. That’s equivalent to about $1900 in 2007 money. However a price spike and a price average over a longer period are very different situations. “

As we all know the price  spiked to above $1900 in September 2011, fell again below $1100 in January this year and is now in sight of breaching $1300.

Motivation, Strategy & Timing

My contribution to investing in gold has been based on motivation strategy & timing. Yesterday’s dramatic responses to ECB President Draghi’s package of stimulus measures was followed by dramatic prices movements  that are settling down today  with these among  other price changes:

GOLD +0.60%,   COPPER+  0.68%

OIL + 2.27%, LEAD +1.15%,, ZINC +1.61%



Price overshoots and undershoots are par for the course in currency and commodity markets.  As it’s likely that  future  price  movements will also be driven by momentum, algorithms and animal spirits it will make sense for  investors to monitor these influences themselves or keep well informed  from a reliable information source.

The Goldwatcher. Page 187 following addresses past consequences of price overshoots.


All postings on this blog  (The Goldwatcher) will remain freely accessible in the public domain. For further Goldwatcher comments please follow Investor Literacy


 From previous Goldwatcher postings: