In the same category

U.S. Financial Stability and Gold

IMG Auteur
Published : August 16th, 2017
583 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : GoldWire

Recently, Fischer made an assessment of financial stability in the United States. What can we learn from it?

On June 27, Stanley Fischer, Fed Vice Chairman, delivered a speech entitled “An Assessment of Financial Stability in the United States” at the IMF Workshop on Financial Surveillance and Communication: Best Practices from Latin America, the Caribbean, and Advanced Economies, Washington, D.C. We know that it was a few weeks ago, but it is still relevant today.

Fischer explained that the Fed focused on four broad cyclical vulnerabilities: (1) financial-sector leverage, (2) nonfinancial-sector borrowing, (3) liquidity and maturity transformation, and (4) asset valuation pressures. He then analyzed each of these factors. Fischer argued that leverage is not a problem, since “regulatory capital at large banks is now at multidecade highs”. Similarly, he believed that “the primary vulnerability associated with liquidity and maturity transformation--that of a self-fulfilling run--is relatively low”.

Fischer also downplayed the worries about nonfinancial-sector borrowing, as total debt remains well below its long-run trend. It’s true that the corporate business sector appears to be notably leveraged, but “firms with high debt growth appear relatively healthy”. Last but not least, he noticed that prices of risky assets had increased recently, but high risk appetites had not lead to increased leverage across the financial system.

Hence, Fischer’s speech was cautiously optimistic. We generally agree with his remarks. There are some reasons to worry, for sure, but the U.S. financial system has improved since the crisis of 2007-2009. Paradoxically, the sluggish economic growth during this expansion strengthens this view, as it shows the lack of excessive boom and irrational exuberance. Actually, a lot investors are very cautious and skeptic about current asset valuations, which is rather not typical of the euphoria seen during speculative manias. Thus, permanent doomsayers and gold bulls should hold their horses.

However, one caveat is that while generals always fight the previous war, economists and central bankers always fight the last recession. Therefore, investors should take central bankers’ assessments with a pinch of salt. They always are too optimistic and use indicators referring to previous depressions, while the next crisis may – and probably will – hit from a completely different angle. This is why it is always reasonable to hold some gold in one’s investment portfolio.

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Gold News Monitor
Gold Trading Alerts
Gold Market Overview

Did you enjoy the article? Share it with the others!

Data and Statistics for these countries : Georgia | All
Gold and Silver Prices for these countries : Georgia | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Take advantage of rising gold stocks
  • Subscribe to our weekly mining market briefing.
  • Receive our research reports on junior mining companies
    with the strongest potential
  • Free service, your email is safe
  • Limited offer, register now !
Go to website.