Home

Wealth Coaching

Author & Speaker

Books

About Me

Site Map

Blog
Karen Newton International
Blog
Mindset
Share Market
Business
Property
Bullion
Lifestyle
General
Book Reviews
December, 2019
January, 2020
February, 2020
March, 2020
April, 2020
May, 2020
June, 2020
July, 2020
August, 2020
September, 2020
October, 2020
RSS
The Changing World of Finance
10/21/2020 12:11:07 PM

The Changing World of Finance

As the world is heading into new lockdowns as winter unfolds the stress on finances are getting worse but are you prepared for the changing world of finance?

This week, Kristalina Georgieva, Managing Director of the IMF did a live presentation about what is currently happening in the global markets.  It gives an indication of what direction the IMF believes the financial world is heading.

In her opening remarks she mentioned having recently visited Bretton Woods where the agreement was made just after the second world war by 44 countries to peg currencies to the US dollar with the US dollar becoming the reserve currency.  It also required the US to hold in reserve an equal amount in gold for each US dollar that was printed.  The US dollar was taken off the Bretton Woods agreement in 1971. (Refer previous blogs) This action in effect turned the world into a debt based financial system.

Kristalina Georgieva talked about the decisions the men faced in when putting the Bretton Woods system together, decisions she likened to what is happening in the world today.  It is no secret, that there has been a move to bring back a Bretton Woods Style System which has been gaining support with the EU actively supporting the idea along with several other countries.  But what impact would such a move have on the world economies.

The Bretton Woods agreement meant that Gold was held in reserve so when a dollar was printed an equal amount of gold was put into the reserve.  The paper currency carried a promise to pay the bearer a specific amount backed by gold.  With the withdrawal of the Bretton Woods Agreement currencies became fiat currencies that floated freely on the markets.  It created today’s Forex Market.  It also meant countries were free to print what they wanted without needing anything in reserve moving the world onto a debt based financial market.  Debt has grown exponentially and so far, this year 12 Trillion has been added to countries outstanding debt in trying to support economies and livelihoods.  Gold has also traded freely so trying to got back to a Bretton Woods Style Agreement would mean a revaluing of Gold as there is insufficient gold in the world to back all the debt currently in existence.  Does gold get revalued to exorbitant highs or is inflation allowed to run rampant to reduce the impact of the debt – The US Fed has already indicated it will allow inflation more scope to go higher.

Within the remainder of her speech she talked about the need to support lower economies through the Debt Service Suspension initiative introduced by the G20 and how she hopes that will be expanded to support emerging economies.  This is a program designed to allow emerging countries to expand, borrow and delay payment of the debt.  This encourages more countries to increase their economic debt.  In her 14th October 2020 article, Shadow report on the limitations of the G20 Debt Service Suspension Initiative: Draining out the Titanic with a bucket?  Iolanda Fresnillo, states that the suspension of payments has only covered 1.66% of all the repayments which were due in 2020.  Debt economies in the emerging markets are still increasing exponentially.

With GDP expected to reach 120% in developed countries, according to Kristalina Georgieva, one thing is certain, no matter what initiatives the IMF, World Bank and Global leaders create to try and deal with the escalating global debt the spending power of money in our pockets will reduce and reduce quite drastically.  Taxes will no doubt go up.  The world of finance as we know it will change.

So, what can you do to cope in this economic turmoil? 

The lockdowns have encouraged more people to go online and build online incomes.  Schools are encouraging students to learn in an online environment.  The internet is more important now than ever as is building multiple streams of income.  The days of one job to provide for your future will no longer exist and families will become more dependent on family members to have 3, 4 or more income streams without the need to work 15 or 20 hours a day to achieve it.  Lockdowns are offering the opportunity to upskill and learn how to maximise multiple streams of income.

The changing world of finance means a changing world of earning income, a changing world of lifestyle and the emergence of an essential digital world to connect people, to educate and to encourage individual growth.

 

 

 

 

 

 

Market Report 5th October 2020
10/5/2020 10:30:59 AM

Market Report 5th October 2020

In this week’s roundup – The US Fed to allow high inflation; JP Morgan Chase receive record fine US$920 million; UK debt reaches £2.02 trillion; China’s Space Mining Bot to launch in November 2020 and more ….

Federal Reserve Chair, Jerome Powell, unveiled a new monetary framework announcing a flexible average inflation target (FAIT) strategy.  The new regime implies that when inflation undershoots the target in a given period, the US Central Bank will try to push inflation above the target in the next period to compensate for the previous shortfalls.  In other words, forget low inflation targets, the Fed will accept any inflation level to bring the yearly average target back to just over 2%.  Powell also indicated there would be no interest rate rises to curb higher inflation.

This week banking giant JP Morgan Chase received a record fine of US$920 million for manipulating the markets.  Between the period of 2009 – 2016 numerous traders at the bank took part in a practice known as spoofing.  This is where traders place numerous large orders with the intent to cancel before completion. The large orders can mislead markets into seeing large buy or sell volumes being processed, artificially altering the impression of demand which causes prices to rise or fall depending on the trade.  In 2018 Deutsche Bank received a fine of US$30 million and UBS US$15 million also for spoofing.  The record fine for JP Morgan Chase indicates the seriousness of the manipulation that took place.

As the UK Government introduces more incentives to work from home, the UK Debt grew in August by another £35.9 Billion, pushing the total UK debt up to £2.023 Trillion, according to the Office for National Statistics.  This sets the debt level to 101.9% of GDP. 

A Chinese start-up is planning to launch its first space mining bot in November.  Origin Space co-founder says the robot is not going to actually excavate resources but will be used for testing technologies.  The goal is to verify and demonstrate multiple functions such as spacecraft orbital manoeuvres.  

Two British billionaire brothers who built a business empire running petrol stations have become the new owners of Asda stores.  The stores were bought from Walmart for £6.8 billion.  In just 19 years the brothers have built a multi-billion pounds business empire through mergers and acquisitions with private equity backing.

 

Share Market

The announcement that US President Trump has Covid-19 hit the already fragile share markets, with the FTSE 100 closing at 5902.  However, news that Trump is out of danger and negative testing for election rival Joe Biden has seen the markets rebound in this morning’s trading.

 

Commodities

Gold – was up 2.58% for the past week currently standing at US$1900.60 per troy ounce

Silver – was up 5.51% for the past week and currently stands at US$24.00

Gold:Silver Ratio – is currently 79.74 indicating Silver is still undervalued

Oil – markets which took a big nose dive last week are recovering slightly with WTI Crude up 2.73% to US$38.06; Brent Crude up 2.34% to US$40.19 and Natural Gas up 4.35% to US$2.54

Alternative Energy – Researchers at MIT have, they believe, achieved the goal of creating a hot burning plasma, fusion energy.  They are currently working on the next-generation fusion research experiment called SPARC, as a precursor to a practical, emission-free power plant according to their research published in the Journal of Plasma Physics this week.


2 items total

Home
Wealth Coaching
Author & Speaker
Books
About Me
Site Map
Blog