Felix Zulauf, a fellow member of the Barron’s Roundtable for over twenty years in addition to a old global strategist at UBS, joins Financial Sense Newshour to embrace a broad attain of global macro issues, including today’s deflationary surround versus the inflationary 1970’s, Nippon every bit the probable catalyst of the adjacent global crisis, why the bond marketplace set is inward trouble, in addition to that gilt could turn down earlier approximately other buying opportunity. Felix too does non believe that the Fed volition ease off its QE plan inward 2013.
Here nosotros acquaint a few portions of the interview airing for FS Insiders Friday, June 14th.
On why continued economical increase could acre a disaster for bonds:
The consensus says that the USA economic scheme [and elsewhere] should survive theatre in addition to firming during the relaxation of the year...If that is correct, in addition to hence it would hateful that bond markets are at serious risk…You bring to maintain inward heed that the banking system, survive it inward Japan, the US, or Europe, is getting virtually gratis coin from the fundamental bank. And in addition to hence they purchase bonds in addition to ride the comport trade. That has been real beneficial inward recent years in addition to it is beneficial every bit long every bit bond yields create non rise. But right away amongst the changing expectations of an improving economic scheme inward the US, it seems that banks are afraid of a 1994 province of affairs inward the bond marketplace set in addition to they are start to sell bond positions…
On a recovery inward Europe:
I create non run across an improvement coming. I create non grip amongst the official forecasts that in that location is a gradual recovery. Those that tell hence because they run across an improvement inward the electrical flow accounts [are incorrect because]…these electrical flow problem concern human relationship improvements nosotros run across inward peripheral countries are actually a reflection of the reduced imports side because of weak domestic demand. It’s much less because of a ameliorate competitive province of affairs in addition to rising exports. So, inward that sense, this improvement inward electrical flow problem concern human relationship balances is real dissimilar from what nosotros saw during the Asian crisis when the Asian countries actually did seize amongst teeth the bullet. They allow their currencies teach downwardly yesteryear 50%. They restructured. Some companies defaulted, etc. etc. And due to the competitiveness regained because of the reduced currency rate, they had an export boom. And electrical flow accounts improved because of export growth, non what nosotros run across inward Europe, which is compressed imports.
On Japan:
I create believe that this volition survive the rootage drive of the adjacent big global crisis whenever it breaks out, belike sometime over the adjacent 12 to eighteen months or so. First of all, I intend the Japanese province of affairs is real unsafe because Japan’s revenue enhancement revenues, when yous aspect at the numbers, they bring to purpose virtually 50% to service their regime debt—their Federal regime debt. So if involvement rates ascent further, Nippon is basically bust…I intend this is a real unsafe matter that the Japanese are starting in addition to I believe it volition most probable survive the trigger for the adjacent big global crisis inward fiscal markets in addition to the basis economy.
Read More: http://www.financialsense.com/contributors/felix-zulauf/japan-root-cause-next-financial-crisis