by Gerardo Del Real, Outsider Club:
Central Banks are trapped and the scenario I’ve been waiting years to see play out is now materializing.
The speculator and investor in me is excited because the volatility that’s approaching will provide some incredible opportunities to make a lot of money.
The human in me cringes because the volatility that we will experience globally will have real-world consequences for many, many people. Consequences that will include defaults, bankruptcies, recessions, and if history is any guide…. war.
It was a busy week on the global stage so lets get right to it.
Central Banks are Trapped
Earlier in the week I noted that although the Fed was likely to leave rates unchanged — for now — that the real action would come from Japan. The Bank of Japan surprised most analysts and investors on Thursday by leaving monetary policy unchanged.
Conventional wisdom indicated Japan would take additional measures to halt currency appreciation in the world’s third-largest economy. This would support domestic exporters and encourage wage growth.
The inaction was unexpected because Japan’s latest attempt to ignite inflation and weaken the Yen, through adopting a policy of negative interest rates, has failed miserably. The dollar has fallen nearly 10% against it since the January policy decision.
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