Author: Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events. He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
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David Murray: Australian government spending on alarming trajectory

David Murray, former Chairman of the Future Fund and former CEO of the Commonwealth Bank warns growing debt-funded entitlement could end with a Europe-style debt crisis.

Hat tip to Unconventional Economist at Macrobusiness.com.au

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Steve Keen on Post-Keynesian Macroeconomics

Prof Steve Keen’s presentation to the UMKC Post Keynesian conference in 2012.

Paul Krugman would argue that Income = Aggregate Demand when the economy is in equilibrium.
Steve Keen shows that the economy is not in equilibrium when aggregate debt is rising or falling:

Income = Aggregate Demand + Change in Debt

He illustrates (at 13:20) how, while GDP fell from $14.5 to $14.0 trillion, the US economy went from $18.5 to $11.5 trillion because of private debt contraction.

US GDP compared to GDP + Debt Change

This does not seem entirely accurate as my earlier chart of US Debt shows that Domestic (Non-Financial) Debt growth slowed but at no stage contracted during the GFC. I suspect that Steve has omitted Government Debt which acted as an important counter-weight to Private Debt contraction during the GFC.

US Domestic Debt Growth

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Georgian government warns of Russian build up as election nears | The Cable

By Josh Rogin

As Georgians head to the polls Monday, analysts are warning that rising tensions could boil over just as the Russian military is conducting exercises near the de facto border line……The European Union’s monitoring mission, which patrols the administrative boundary between Georgia and the Russian-occupied regions of Abkhasia and South Ossetia, noted in its most recent report that while the observers saw no movement of military equipment on the Georgian side that could be perceived as instigating an attack, the Russian forces on the other side of the boundary line are increasing……

via Georgian government warns of Russian build up as election nears | The Cable.

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China’s rail cargo volume declined further in August

by Zarathustra

Rail cargo volume growth fell further from -8.2% yoy in July to -9.2% yoy in August, worst since the financial crisis. Cargo volume transported by the railways amounted to 304 million tonnes in August 2012, slightly below 305 million tonnes in July.

via China’s rail cargo volume declined further in August.

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Chinese Yuan hits highest level against USD, but PBOC wants it weaker

by Zarathustra

After a long period since late last year as Chinese Yuan was expected to depreciate, it appears that the expectation of Chinese Yuan appreciation is back on people’s mind. Chinese Yuan hits the highest level since the revaluation started in 2005, completely reversing the depreciation since earlier this year…..

via Chinese Yuan hits highest level against USD, but PBOC wants it weaker.

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China Alters Its Strategy in Dispute With Japan – NYTimes.com

By JANE PERLEZ

Notions of punishing Tokyo economically for buying the islands, whose status was left unclear after World War II, are unrealistic, said Hu Shuli, editor in chief of Caixin Media and one of China’s chief economic journalists. So many Chinese workers are employed at Japanese-owned companies, she said, that any escalation of tensions leading to a boycott of Japanese goods could lead to huge job losses.

This would be disastrous in an already shaky Chinese economy, Ms. Hu wrote in the Chinese magazine Century Weekly……

via China Alters Its Strategy in Dispute With Japan – NYTimes.com.

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Bachelor Padding – By Roseann Lake | Foreign Policy

By Roseann Lake

As a result of the real estate boom, reports in Chinese media indicate that the average property in a top-tier Chinese city now costs between 15 and 20 times the average annual salary, though J.P. Morgan reports indicate something closer to 13. For purposes of comparison, in most of the world’s cities, the housing-cost-to-income ratio hovers between 3-to-1 and 6-to-1, rounding out at about 3-to-1 in the United States. This is especially problematic in China, where thanks to still-prevalent Confucian ideals of the male as the “provider,” home ownership has become an unspoken prerequisite to marriage. It’s a tough, competitive life for men in China these days, in part due to the aftershocks of the one-child policy, which has left the country with a gaping gender imbalance of 120 boys for every 100 girls……

via Bachelor Padding – By Roseann Lake | Foreign Policy.

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Obama's economic saviour savaged as Keating lets rip

By Peter Hartcher

In a speech to a closed gathering at the Lowy Institute in Sydney on Thursday, Paul Keating gave a starkly different account of Geithner’s record in handling the Asian crisis: “Tim Geithner was the Treasury line officer who wrote the IMF [International Monetary Fund] program for Indonesia in 1997-98, which was to apply current account solutions to a capital account crisis.” In other words, Geithner fundamentally misdiagnosed the problem. And his misdiagnosis led to a dreadfully wrong prescription.

For the record, Indonesia’s GNP fell 83% by July 1998.

via Obama's economic saviour savaged as Keating lets rip.

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There's No Solving Europe's Debt Crisis Without Solving the Jobs Crisis – Bloomberg

From the outside it looks like these [Eurozone] countries are faced with a debt crisis. From the inside it looks a lot more like a jobs crisis. Check out the chart below…….

via There’s No Solving Europe’s Debt Crisis Without Solving the Jobs Crisis – Bloomberg.

Hat tip to @10yearBonds

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Dollar bounce, gold and copper retrace

The Dollar Index is retracing to test resistance at 81.00/81.50. Respect would confirm the primary down-trend, as indicated by 63-day Twiggs Momentum below zero.

US Dollar Index

* Target calculation: 81 – ( 84 – 81 ) = 78

Spot Gold is retracing below resistance at $1800 per ounce*. A 63-day Twiggs Momentum trough above zero would signal a primary up-trend. Breakout above $1800 would confirm, indicating rising inflation expectations in response to QE3.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

Copper is also retracing. Respect of 8000 would be a bullish sign. Again, a 63-day Twiggs Momentum trough above zero would indicate a primary up-trend. Breakout above 8600 would confirm, indicating that global economic activity is reviving. Failure of support at 8000 would suggest the opposite.

Copper

Brent Crude is falling after breaking support at $112 per barrel. 63-Day Twiggs Momentum below zero warns of a primary down-trend. The fall, despite increased inflation expectations, reflects slowing economic activity rather than increased security. Syria and Iran remain concerns in the Middle East. Test of support at $100 would warn of another down-turn.

ICE Brent Crude Afternoon Markers

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