Monetary policy case study: South Korea vs Japan

The picture may be four years old, but it does a great job of showing the South-Korean eagerness to take Japan`s place as high-end apparel exporter. While most of the eyes focus on the miraculous growth story of China, the economic power of South Korean business conglomerates (formally called chaebols) is ever-increasing at the expense of their Japanese counterparts (named keiretsu). This is because South Korean companies have a fortunate advantage in the relative weakness of their national currency.

Wednesday market outlook

Interesting times we`re trading in. The markets are screaming for an impeding correction, but as the global printing press pumps liquidity into the markets the game of musical chairs has no choice but to continue. What will happen when the music stops and all these injections will prove they have diminishing returns? Until then, let`s take a look on what the markets did this week: gold has managed to hold the bullish channel it entered on the 22nd of February, the S&P looks like a rabid bull and the effects of Bank of Japan`s massive intervention on the yen seems to be wearing off.

LTRO liquidity tsunami floods back to the ECB with little effect

The so-called Draghi put, more formally named "Long Term Refinancing Operation", through which the European Central Bank is offering almost unlimited liquidity with 3 years maturity at 1% yield, has proven unsuccessful at supporting the sovereign bond market. The big plan was that, by offering massive amounts of low cost financing to banks and financial institutions, they will park some of this excess cash into European debt instruments. Instead of this, it turns out that banks have chosen to deposit the funds back at the ECB and conduct small carry trades at the short end of the yield curves.

Marc Faber: Americans need to tighten their belts and save more

Marc Faber, the well known author of the GloomBoomDoom Report, and widely regarded as one of the investors who predicted the 2008 crisis, has declared in a recent interview on CNBC: 

"I will tell you what the US needs.  The US needs a Lee Kwan Yew who stands in front of the US  and tells them, listen you lazy bugger, now you have to tighten your belts, you have to save more, work more for lower salaries and only through that will we get out of the current dilemma that essentially prevents the economy from growing."