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The Fed tried to talk down the dollar last Wednesday. Essentially firing a warning shot (downgrading estimates for growth, inflation and short-term interest rates). The ultra-low rates in Germany and Japan vs. the U.S. favor the dollar. Anything that points to the Fed raising rates enhances the attractiveness of U.S. bonds and attracts further capital flows.
The McKensey report on debt has received a lot of press (and rightfully so). The problem is debt and deflation has the lead in the inflation deflation race. It is the foe we do not wish to win. This from The Telegraph in a piece titled, “From bust to boom: How the world became addicted to debt”.
Not one developed economy (and only five emerging markets) has managed to reduce debt-to-GDP ratios which include both household and government debt. When taken together, this total debt mountain has grown by $57 trillion since 2007, far outpacing global growth.
This explosion in public debt levels has come about as countries have been unable to “inflate away” their liabilities. Instead, a global deflationary spiral has amplified the amount that countries owe and the interest they pay to service these debts.
Each country is playing from the same playbook. Thinking, if only we can grow our way out of this mess. Debase currency, become more competitive currency wise – grow the economy and inflate away the debt. The opposite is happening.
Founder & CEO CMG
Stephen Blumenthal founded CMG in 1992. He is CEO, Chief Investment Officer and portfolio manager at Capital Management Group, Inc. where he manages equity and tactical investment portfolios. He is a frequent speaker and writer on investment strategies and has been featured in various media sources including the Wall Street Journal, Barron’s, Investor’s Business Daily, Pensions & Investments Magazine, Investment News, RIA Biz and Smart Money. He has been a guest on CNBC, Wall Street Journal Live, and Bloomberg. Mr. Blumenthal is a frequent speaker at industry conferences (NAPFA, IMCA, Index Universe, Opal Financial Group Indexing & ETF Summit and NAAIM) and is author of CMG’s popular investment research commentary. With 30 years of investment management and industry experience, prior to founding CMG, Mr. Blumenthal worked for Merrill Lynch Institutional, Merrill Lynch Retail and Prudential Securities.
Mr. Blumenthal graduated with a Bachelor of Science degree in Accounting from Pennsylvania State University. He is married, has three children and is active in his community coaching youth soccer.