Geopolitical Futures sent out an interesting article today that considers whether what’s happening to the Turkish lira is only a problem for Turkey.  From the linked article:

What do the Turkish lira, the Iranian rial, the Russian ruble, the Indian rupee, the Argentine peso, the Chilean peso, the Chinese yuan and the South African rand all have in common? They’ve all declined steadily this year, and some have depreciated dramatically in the past two weeks alone. But this isn’t the whole story. The whole story is that each of these countries is sitting on a ticking time bomb of U.S. dollar-denominated debt.

This story has been long in the making. In the 1990s, many countries began to accumulate large amounts of debt denominated in U.S. dollars. It was an effective way to kick-start economic activity, and so long as their own currencies remained relatively strong against the dollar, it was fairly risk free. From 1990 to 2000, dollar-denominated debt tripled from $642 billion to $2.17 trillion.

The problem may now be coming to a head. Dollar-denominated debt has ballooned. In its latest quarterly report, the Bank of International Settlements found that U.S. denominated debt to non-bank borrowers reached $11.5 trillion in March 2018 – the highest recorded total in the 55 years the bank has been tracking it. Meanwhile, the dollar has strengthened amid a tepid global recovery from the 2008 financial crisis. As the currencies of indebted countries weaken against the dollar, it is becoming harder for some countries to pay their debts. This could be a bubble waiting to pop, especially if vulnerable countries don’t have the monetary policy options to protect themselves.

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Some Good News About America

by Marilou Moursund on August 3, 2018 in Employment

Jim Geraghty of The National Review had an interesting column today that recounts some of the good things happening in America.  From the linked article: We groan that we’re governed by crooks, incompetents, and morons, but we’ve actually done a pretty good job of solving the problems that faced this country a generation ago. Crime […]

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How Business Confidence can Drive Real Growth

by Laura Ehrenberg-Chesler on July 25, 2018 in capitalism

From the New York Times this morning: “The confidence is rooted only partly in hard-nosed data, like the rapid pace of growth expected for the second quarter and record low jobless rates. It is also a sign of harder-to-measure sentiment. “Animal spirits are high,” said Tim Ryan, United States chairman of the global accounting and […]

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One-of-a-Kind Hospital for Military Dogs is in San Antonio

by Marilou Moursund on June 29, 2018 in Military

I loved this article in the San Antonio Express-News today.  The Lt. Colonel Daniel E. Holland Memorial Military Working Dog Hospital is located on Joint Base San Antonio-Lackland.  Military dogs from all over the world are flown here to be treated.  From the linked article: Robin isn’t yet a military working dog, but he was […]

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Junk Bond Spreads are a Positive Sign for the Economy

by Marilou Moursund on June 26, 2018 in Bonds

Just like stocks, junk bonds perform better when the economy is strong.  This is because the companies are earning enough money to cover their interest payments.  When the economy weakens, the spread versus the comparable Treasury bond widens as investors move to less risky assets.  Junk bonds are performing better than investment grade debt this […]

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Tune Out the Noise of a Trade War

by Laura Ehrenberg-Chesler on June 20, 2018 in Earnings

From our favorite economist Ed Yardeni: “Trump’s approach risks escalating the trade skirmishes into an all-out trade war, which would depress global economic activity. Now let’s try to tune out the noise of war and find some peace and quiet: (1) Forward earnings. Notwithstanding all of the above, Joe and I continue to focus on […]

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It’s Fed Day Today

by Marilou Moursund on June 13, 2018 in Economic Indicators

It is widely expected that the Federal Reserve will raise rates by a quarter of a percent today.  From the linked Wall Street Journal article: It’s possible that continued strong hiring in the U.S., which pushed down the unemployment rate to 3.8% in May, leads at least one official to move up from three to four […]

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A Primer on the Political Turmoil in Italy

by Marilou Moursund on May 30, 2018 in currencies

It wouldn’t be summer without political turmoil in Europe.  The Dow fell 400 points yesterday on concerns about Italian debt after the Italian president blocked a coalition government from forming.  The New York Times has a good article explaining what is going on in Italy.  From the linked article: The two parties that won the […]

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Recession – Not in the Foreseeable Future

by Laura Ehrenberg-Chesler on May 23, 2018 in Earnings

From Economist Ed Yardeni today: “Since we don’t see a recession in the foreseeable future, we continue to focus on the forward P/E, which isn’t alarmingly high, in our opinion. The further out that a recession is perceived as likely to happen, the more sustainable are above-average P/Es. That’s because long expansions give investors the […]

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Rising Rates Create Tighter Financial Conditions

by Laura Ehrenberg-Chesler on May 17, 2018 in Fed policy

From the WSJ today: “The yield on the 10-year Treasury note climbed to 3.082% on Tuesday, breaking above a 2014 peak to settle at its highest level since 2011. The rise in that benchmark stands to lift borrowing costs for everyone from consumers to corporations. Meanwhile, the WSJ Dollar Index, a measure of the U.S. […]

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