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Markets  |  December 17, 2012 13:15:05

Hyperinflationary collapse?


iPoint.cz After three weeks, the gains seen last week U.S. stock markets slight decline. Who shares were backed monetárnymi new stimulus from the Fed, which extended QE3 + to 45 billion per month in the form of purchases of bonds and also even reversing notification of plans to repurchase shares by companies like DuPont or Berkshire Hathaway, had a negative impact on the markets should again shares of Apple . The tie recent weeks still to come adverse reports, since demand for the iPhone 5 is not so great as expected, and also in the future the company plans to lower order components of your device.Flange is Apple's largest component indices as well as the Nasdaq 100, S & P500, movements have this giant impact also on this index.

Fiscal reef still no solutions


In addition to motion ovplyvňoval Apple shares last week trading behold fiscal cliff. The head of the Republicans in the House of Representatives Boehner said he does not see too much room to reach an agreement before Christmas and then according to your current administrations have gone to the feast home. At the weekend, but released its new proposal concerning the solutions fiscal cliff. Demokratom offered a proposal increases taxes for households with higher income than $ 1 million, which should over the next decade to bring the budget to 450 billion USD. Subsequently USD 550 billion should bring changes in tax laws.Overall, would therefore higher taxes should bring to budget 1 trillion. USD. Obama initially wanted tax increases to 1.6 trillion., Which subsequently declined to 1.4 trillion. Whom Obama wanted to raise taxes for households had income above 250 thousand. USD, Boehner up for those with income over $ 1 million. While both sides have already made the concessions, it still is not an agreement and further discussions will be needed, by whom both parties can find vybalansovaný proposal. By Christmas it but probably will not, and at least in Safari likely to form vyvinutie pressure on the other side will have to be a fiscal cliff.

Japan's future: inflation and a weak

Top Stories this weekend but did not relate to the fiscal cliff, but policies in Japan. Sunday's election in Japan resulted in victory for the LDP, led by Abe, which is the prime minister returns after five years.Page koaličným accompanied by its partner New Komeito won 325 votes, which is in the 480-member lower house of parliament superväčšina. That way, your page may even enforce some laws, despite voting time opposite the upper chamber. This means that with some stimulačnými laws will not have to wait to Abe summer, when will the elections to the upper chamber, but moves them much earlier. Consent upper chamber needs such leadership nominated by the BoJ. Markets started immediately counted possibility agresívnych incentives, which resulted in a growth curve for Japanese výnosovej dlhopisoch. Yield on 20 year olds dlhopisoch is about 99 basis points higher than the 10-year dlhopisoch. Thus, a steep yield curve has not been since 1999. In comparison, in the U.S. is such a steepness of 68 bp. Responded well only, which weakened against the dollar at 20-month lows.Incentives, counted starting on the market, are nominal economic growth of 3% and inflation at 2%. Abe also considering or accidentally cancel the planned surcharge may be levied VAT which is to be doubled in 2015. The credit rating agency S & P said that it may, if nepokračovania reforms to revise the rating AA-and possibly even lower rating. CDS market while the Japanese policy did not respond. Moreover agresívnych monetárnych stimulus is said, also on further fiscal stimulus. While it is said of the volume of 5-10 trillion. Jenova. This package could be reported as early as January. Nikkei Agency again said that monetary incentives should nominantov LDP-led run regularly in every quarter with the preliminary volume of 15 trillion. yen annually. This will be a loan at a rate of 0.1%.
Abe's plan as to weaken the yen and receive real contours, but it is still a question, or can generate economic growth and inflation.

Hyperinflationary collapse?


According to Nomura Bank chief economist Richard Koo-a, who became famous mainly to his outlook on the financial crisis as the recession balances, threatens Japan hyperinflation. On purchases of assets from the market Central Bank (known as QE or LSAP) by the other party always making bodies of surplus reserves in commercial banks. When the Fed or the BoJ bought in bonds, not pay not even warm notes of their printers, but the surplus accounts of commercial bank reserves at the Central Bank will credit the same amount of resources.According to Koo-and those are just redundant reserves potential spúšťačom hyperinflation, since when banks begin to lend to them, occurs through monetary multiplier according to his calculations, inflation in the band 500-1000% in Europe and the Japanese woman respectively. in U.S..

Monetary multiplier can induce inflation

Its calculations based on the theory of multipliers, which talks about expansion of money in circulation through the provision of credit. This means that if you begin to grow loans, come to a huge amount of money expansion, which invokes Said hyperinflation. Current commercial banks in Japan in need of required reserves in the volume of 7.7 trillion. Jenova, no surplus reserves to Achieve 29.8 trillion. Jenova.

Is it really so? Indeed, how can monetary multiplier parameter to cause hyperinflation? Probably not. First, although Japanese firms have no debt and almost none remain with very good balance, willing to accrue debt is still not, and second, Stu bank lending still restricted in expansion capital and no reserves. So hyperinflationary collapse is not yet given the real credit expansion. In Japan, the rate is zero for more than a decade, but so far failed to generate or even slightly inflation. Debt problem may be in Japan over the coming years to avoid out of control, but it will not be the result of the private sector, but a huge demographics and government debt.

View on today

Macroeconomic calendar today except New York poll result of production and, therefore, does not offer anything to the development in the euro depends mainly on the reports coming from the U.S. regarding the fiscal cliff. Flange but the couple is still moving at silnom rezistenčnom band (albeit broke the new maximum at 1.3187, the highest level since early May), leaving today view as a neutral and we expect the behavior of markets. Slide at 1.3130 / 20

Author: John Benaki | TRIM Broker, as | Trading on exchanges TRIM Broker


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