Macroeconomics

Global debt levels have surged to a record $217 trillion in the first quarter of the year. This is 327% of the world’s annual economic output (GDP), reports the Institute of International Finance (IIF). It has grown by $75 trillion since the 2007-08 financial crisis reaching US$28,900 for every man, woman and child in the world

The surging debt was driven by emerging economies, which have increased borrowing by $3 trillion to $56 trillion. This amounts to 218 percent of their combined economic output, five percentage points greater year on year.

The US economy expanded at a stronger-than-initially-expected pace in the March quarter amid higher consumer spending. The Commerce Department reported on Thursday that the domestic economy grew at an annualised pace of 1.4% in the Q1 of 2017, following the preceding quarter’s expansion of 2.1% and surpassing the prior estimate of 1.2% growth.

Banks in Switzerland saw their profits nearly halve to CHF 7.9 billion in 2016 amid continuing global pressure on their famed secrecy walls. Surprisingly, the overall customer deposits, domestic as well as foreign, rose in Swiss banks.

The staff count, however, was down, as the number of banks, which declined again last year, from 266 to 261, for the fourth year in a row. While two new banks came up seven moved out from the list, as per the annual statistics released today by Zurich-based Swiss National Bank (SNB), the country’s central banking authority.

In June 2017, the KOF Economic Barometer rises by 3.5 points (from revised 102.0 in May) to 105.5. It thus largely recovers from the substantial decrease in the previous month. Accordingly, the short-term outlook for the Swiss economy suggests above-average growth rates.

This Newsletter has predicted a stock market correction at the least if not a crash in the near future and favors gold as an investment. What has happened is that the FAANG stocks continue to ride high while the rest of the market generally limps along. The gold price suffers a setback every time it strikes northwards. If that was not enough to make one suspicious, inflation remains low despite huge injections of capital into the economy.

A measure of Swiss household spending trends rose modestly in May, after the reading for the previous month was revised down sharply, suggesting slightly below-average growth in private consumption during the second quarter, survey data from the UBS investment bank showed Wednesday.

The UBS consumption indicator climbed to 1.39 points from 1.34 in April, which was revised from 1.48. This matches the UBS CIO consumption growth forecast of 1.3 percent for this year, the bank said.

This Newsletter has suggested in the past that investors avoid bonds, and it is likely that bonds will become even worse investments in the near future. The geniuses at central bank headquarters in the US, EU and Japan have created a situation that makes it extremely risky and unprofitable to put money in bonds.

Not only have bond purchases by central banks distorted the bond market but the ZIRP and NIRP implementation has resulted in central banks not being in a position to combat the next recession. The present policy of the Fed to raise interest rates in a sluggish economy will only hasten the arrival of the next downturn which has already started in some sectors.

The European Central Bank (ECB) said it will set up an instant payment system across the eurozone allowing consumers and firms to send money "within a matter of seconds".

The new service, TARGET instant payment settlement (TIPS), will enable citizens and firms to transfer money between each other in real time and will be available around the clock, 365 days a year.
It said the new network "will allow citizens and firms to make payments via their bank anywhere in the euro area within a matter of seconds", and is scheduled to come into operation in November 2018.