• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 2 hours China has invested btw $30 - $40 Billon in Canadian Oil Sands. Trump should put 10% tariffs on all Chinese oil exported into or thru U.S. in which Chinese companies have invested .
  • 3 hours It's Not the Job of the Government to Dictate Where Businesses Should Go
  • 13 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 12 mins US Shale Economic Impact: GDP gain realized in shale boom’s first 10 years
  • 3 hours Offshore subsea sub 50$/bbl : Rystad Energy: High stakes in store for subsea markets if oil falls to $50/bbl
  • 49 mins Tit For Tat: China Strikes Back In Trade Dispute With U.S. With New Tariffs
  • 1 day IS ANOTHER MIDDLE EAST WAR REQUIRED TO BOLSTER THE OIL PRICE
  • 22 hours Strong, the Strongest: Audi To Join Mercedes, BMW Development Alliance
  • 1 day Iran Is Winning Big In The Middle East
  • 23 hours Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 7 hours Philadelphia Energy Solutions seeks to permanently shut oil refinery - sources
  • 7 hours TRUMP'S FORMER 'CHRISTIAN LIAISON' SAYS DEEPWATER HORIZON DISASTER WAS GOD'S PUNISHMENT FOR OBAMA ISRAEL DIVISION
  • 9 hours US to Drown the World in Oil
Alt Text

Did Venezuela Just Default?

S&P Global Ratings declared Venezuela…

Ag Metal Miner

Ag Metal Miner

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends,…

More Info

Premium Content

Bank of England Governor: Global Economy is Back on the Precipice

We don’t normally look to Mervyn King, governor of the Bank of England, as a luminary of the financial world. Not that Mr. King isn’t a clever fellow, but he has a rather unfortunately stodgy image that belies his considerable intellect. However, comments in the bank’s Inflation Report this week make such interesting reading that they deserve examination here.

“There is only one way for the world to go,” he is quoted as saying in the Telegraph, “for the pent-up losses caused by the vast debts amassed in the boom to be shared between creditors and debtors. This,” he said, meant that “in the world economy between creditors in the East and debtors in the West, and within the euro-area between creditors in the North and debtors in the South.”

The problem is that there are two ways the situation can be resolved; either voluntarily, as surplus countries like China let their currencies appreciate, or violently, in the context of a downturn in the world economy. Unusually for a central banker, he pulled no punches in placing at least some of the blame on China for pegging its currency to the dollar and in the process amassing huge quantities of the currency that it essentially lent back by buying US treasuries, keeping US rates low and stoking the debt buildup around the world.

Under normal terms of trade when a country does well, runs a surplus and enjoys booming exports, its currency appreciates relative to the currency of the countries it is selling to; as the currency appreciates, competitiveness declines, creating a natural balance. This was not allowed to happen with the Chinese yuan, creating the imbalances we have today. But China was not alone in being the target of his criticism.

In the same way, Germany has benefited from its membership of the weak euro, and this has boosted exports in a manner that would never have happened if Germany had retained the deutschmark. The currency would have been much stronger and exports would have been lower as a result. Those funds were recycled internally in loans to poorer, less fiscally disciplined southern European states, countries that are now so uncompetitive and so indebted they are unlikely to ever be able to repay debts.

King is suggesting that creditors such as China and Germany are as much to blame for the current situation as debtors like the US and UK, and that creditors will have to share in the pain with debtors who so far have borne the brunt of the sacrifices by way of austerity measures. China will face further currency appreciation, which will devalue its US debt and reduce its export competitiveness, and Germany will have to absorb losses through rescue schemes and write off sovereign debt held by its banks — if they do not, then a prolonged global recession is the alternative outcome.

In King’s view, the global economy is back on the precipice – and it is the world’s creditor nations that are holding the rescue lines.

By. Stuart Burns

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends, strategies, and trade policies that will impact how you source and/or trade metals and related metals services, MetalMiner provides unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play