The Sage of Omaha has spoken. On Fox News yesterday Warren Buffett dismissed the possibility of an interest rate rise in the middle of this year. To paraphrase this multi-billionaire, the global economy is too weak to allow it to happen: money would flow from Europe to the US disrupting the delicate balance of a global economic slowdown.
The signs of the slowdown are only too obvious if you care to look around: the slumping price of oil, iron ore and copper; falling US and Chinese order books; monetary policy easing by 13 central banks; the uneasy sight of the UK as the world’s best performing economy in a deliberating engineered pre-election boom set to end shortly after May 7th; and disappointing Q4 US economic growth.
Global recession
All these indicators are harbingers of the next global economic recession which has probably already started. With these headwinds the US will do well to maintain its present lacklustre momentum in the worst economic recovery in its two-century history. How can the Fed possibly raise rates this summer or anytime this year?
So that probably means that the US dollar is also already past its peak valuation for the year. Twas ever thus. When everybody is on the bullish side of a trade it has nowhere else to go but down. If dollar interest rates are not going higher why would you want greenbacks or US treasuries?
This post was published at GoldSeek on 5 February 2015.
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