Page 21 - May-June 2018 GSE Report Flip Book

MONETARY POLICY
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president is rumored to be considering a Cabinet reshuffle and has remained defiant as ever, insisting that his government will not fall even as rumors surface that he may be impeached. If the situation sours, impeachment may be the best Rouhani could hope for. Iran has overextended itself in Iraq, Syria and Lebanon, and its overextension, along with the death of the Iran nuclear deal, is putting a great deal of pressure on the country that has become the center of gravity in the Middle East. (Geopolitical Futures, 06/30/18)
China—the land of contradictions
Geopolitical Futures staff wrote:
The week [of June 25th] began with police breaking up protests staged by army veterans. By midweek, President Xi Jinping was telling his country’s diplomats to remain loyal to the Chinese Communist Party—a sign of his strength or his weakness, depending on how you look at it. By the end of the week, we were investigating reports that at least one major Chinese city had failed to pay its civil servants on time. Is the government beginning to crack, as so many of its predecessors have, under the weight of such a large and diverse country? Or is Chinese power so palpable that none of this matters, even in the absence of a credible opposition? There is perhaps no more important geopolitical story in the world. (Geopolitical Futures, 06/30/18)
China’s economic expansion slowed further in June and its currency, the yuan, faced a fresh bout of weakness, underscoring the fragility of the world’s second-largest economy in the face of on- going tariff disputes with the U.S. A sharp deceleration in Chinese credit expansion may have also slowed economic expansion, according to Bloomberg Economics’ Fielding Chen at Bloomberg Economics. The impact of slower credit growth and the escalating trade war appears to have hurt sentiment for smaller companies and stock and property investors, according to Chen. The trade war has hurt market sentiment, but its impact on the economy hasn’t yet materialized,” he added.
“We see headwinds from China’s housing market, export sectors and private firms on lower investment appetite, rising trade tensions between China and the U.S., and tighter credit conditions,” Shen Lan, a Beijing-based economist at Standard Chartered Plc. “Deleveraging efforts will likely continue, but mainly through regulatory means rather than monetary policy tightening.” (Bloomberg News, Xiaoqing Pi, and Adrian Leung, 06/27/18)
Will political risks trigger global monetary reset?
Agora Financial’s Jim Rickards wrote:
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