Will The G20 Summit Help The Global Economy? Facts You Need To Know

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Tweed-Economics-Global-Economy

All eyes were on the G20 Summit in Osaka, Japan in June as the world held its collective breath about the trade war between China and the United States.

Some of the most important talks that were the focus of the 2019 G20 were actually conducted before the G20 began. Other important discussions and agreements did not get fully aired in the mainstream media. This article will examine the important business of the G20 that will actually have an impact upon the lives of many around the world.

What is the G20?

According to the BBC, the G20 economic summit is a meeting with leaders from the 20 largest economies in the world. These countries make up 86 percent of the global gross domestic product (GDP) and contain two-thirds of the world’s population. Notable countries that are a part of the G20 include the United States, Russia, China, India, the United Kingdom, Germany, France, Japan, South Korea, Brazil, Australia, Canada and Mexico. The idea for the meetings began in 1999 when there was an economic crisis in East Asia that was threatening to expand to other areas of the world.

What Were the Important Issues Discussed This Year?

Discussions included trade discussions and the Iran Crisis, this is what happened:

The U.S./China Trade War

According to The Guardian newspaper, both the U.S. and China have been engaged in an escalating war of trade tariffs imposed upon the other country. The Guardian stated that Japanese Prime Minister Shinzo Abe, E.U. President Jean-Claude Juncker and Russian President Vladimir Putin were among others that are urging the U.S. and China to find commonalities and reach agreements because their trade war is endangering the world economy.

According to CNBC, U.S. President Donald Trump and Chinese President Xi Jinping put their teams of advisors to work before the G20 and began to come up with a bit of a compromise. At the G20, both leaders announced they would forego further tariffs.

Also, Trump announced that he would allow Huawei, the Chinese telecommunications giant, to buy products from U.S. firms. Trump also stated, though, that the issue of American firms selling products to Huawei is not totally closed. According the CNBC, the International Monetary Fund has calculated that the proposed tariffs between the two countries and those already being implemented will cause a half of a percent decline in growth in the world economy.

Macron Makes a Line in the Sand on Paris Accords

According to the New York Times, French President President Emmanuel Macron issued what amounted to an ultimatum to 19 of the 20 countries that comprise the G20. He stated that France will not be a part of any agreements brokered at the G20 that do not honor the Paris Climate Treaty. Macron has given up hope of convincing the lone hold-out of the G20 on the Paris climate accords, the United States, to sign on.

The French government is also angry at the U.S. for leaving the JCPOA anti-nuclear pact with Iran and also angry at the U.S. government’s belligerent stance towards Iran. Macron is very displeased that the U.S. stance towards Iran could lead to war.

Politico reported that Trump lobbied the Saudi Arabian, Australian, Turkish, and Brazilian leaders to oppose or weaken the climate agreement language from the previous G20 summits.

Meanwhile, Reuters reported that Macron also placed some direct pressure on Brazilian President Jair Bolsonaro, stating the French would not sign onto an upcoming trade deal between the E.U. and the Mercosur group that consists of the countries of Argentina, Brazil, Paraguay and Uruguay if Brazil did not honor the Paris climate accord. France is concerned about competitiveness between the farmers in France and those in the South American countries. French farmers are prohibited from using pesticides and must reduce their carbon footprint. Macron is demanding that the Mercosur countries follow strict E.U. environmental guidelines. Macron is also concerned about the expansion of the devastation of the Amazon rain forest.

This development continues to illustrate that multi-country alliances and trade deals can spill beyond the borders of one country to others. In this case, the South American countries will be required to follow E.U. guidelines for the farming industry if they hope to trade with the E.U.

Russia, China and India Agree on Trade

The National reported that Russian President Vladimir Putin, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi made a strong statement at the G20 that they oppose countries engaging in unilateral actions, protectionism instead of fair trade and unlawful sanctions against other countries. The three countries urged all G20 members to respect the sovereignty of other countries and the rule of law.

No Real Progress on Iran Crisis

Although German Prime Minister Angela Merkel and Russian President Vladimir Putin urged the United States to step back from threats of war with Iran, little progress appeared to be made in this urgent matter.

Overall, an easing of the U.S./China trade war, an effort to bolster the Paris climate accords and a strong statement from three of the BRICS member nations on free trade and sovereignty issues highlighted the 2019 G20.

Market Indicators That All Finance Experts Should Be Looking At

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Tweed-Economics-Market-Indicators

Finance experts have to look at a wide variety of metrics to do their jobs and properly understand trends in the economy. They have to be aware of both macroeconomic and microeconomic factors at the company level in order to make these analyses. Here are three of the most critical market indicators that any financial expert should know in order to do their jobs.

Volatility

Volatility is perhaps the most important factor that any financial expert should know. This concept is the clearest way to understand how an individual can predict the movements of financial markets. Volatility is measured by the VIX index and other factors. In many ways, volatility is more damaging than a simple downturn in the market. Financial experts know how to transfer their assets and pick counter-cyclical industries if they see that a downturn is coming.

They are not able to make those same bets if there is a considerable amount of volatility in one or more sectors. Knowing volatility is helpful for understanding what factors influence the decisions that financial experts make. One decision that many experts have to make is whether or not they want to take short-term or long-term positions in securities.

Having a short-term outlook may push financial experts to recommend more short sales and limits on trades. Financial experts also may focus more on the bond or real estate markets than stock markets at times of high volatility. High volatility often means a greater chance of losing money for anyone invested in the stock market. Times of steady growth are the best possible times for investment and often do not go along with high ratings on the VIX index.

Value Pprojections

Value projections are the most common market indicators that most individuals use to understand markets. They are the essential facts behind the performance of companies. Most companies release a wide variety of statistics about their performance over the previous year or quarter. But they also issue predictions about how those same companies will perform over the next year. These predictions are more informative to a financial expert than the previous year’s numbers because they help show expectations and assumptions by professionals from a wide variety of companies.

Expectations and assumptions about trends in the market drive the market more than almost any other fundamental. Financial experts can buy, sell, and hold based directly on these predictions. Their job is to show the predictions that matter and the predictions that are based on poor forecasts or guidance. By picking the most influential ideas about the performance of the stock market, a financial expert can use value projections to greatly aid their analyses.

Real Estate

Financial experts need to make sure that they are considering other asset classes outside of bond and stock markets. One of the most common other asset classes to consider is real estate. A wide variety of new, used, individual, and commercial real estate metrics is released every month. This information can point to the success of consumer spending and the economy in general. Real estate is vastly more influential than information about nearly every other industry. Buying a home is often the most consequential purchase that any family will make. It involves a transfer of hundreds of thousands of dollars over a period of years or even decades. As a result, moves in this market show the financial ideas and security of millions of Americans.

Every financial expert needs to become as familiar with this market as with any other. They need to better understand how the real estate market influences the amount of money that individuals spend on technology products and staples. In addition, financial experts need to learn the amount of time it takes for moves in the real estate market to translate to moves in equities markets. Such an understanding is critical for financial experts to make recommendations about the prices of stocks or the performance of the bond market.

No finance expert can perfectly predict every movement of the market. But following critical financial indicators can help ensure that an individual is as informed about markets and market developments as possible. Knowing about volatility and other asset classes helps experts stay informed and make financial plans that are likely to generate considerable returns over a period of time.

Can The Global Debt Cause Another Financial Crisis?

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Global debt has reached new heights according to recent news reports. S&P is out with a new study arguing that the amount of global debt has increased by over 50% since the Great Recession. This number has created understandable worry among a large number of economically-minded individuals who are concerned about the global economy’s ability to handle massive quantities of debt. But there is also concern about what countries do with the debt that they accumulate. Using debt properly, as well as keeping it low, needs to be the main priority of developed nations around the world.

Debt and financial crises

The relationship between debt and financial crises is not direct. It is true that debt at certain levels cannot be sustained. Large interest payments lead to a considerable amount of stress on a country’s economy. Countries do not have the money that they need to pay for infrastructure or social programs. If countries are placed in a difficult position, they may not have the extra cash needed to pay creditors regularly.

There is the looming chance of a default like the one that harmed Greece during the Great Recession. It is possible that countries will have their credit rating downgraded as well. Countries with lower credit ratings will be unable to borrow as cheaply as before and their budgets will take a hit as a result.

Major Defaults

Major defaults could certainly cause a worldwide financial crisis. But at the same time, some countries can use small amounts of debt to do an extraordinary amount of good. Debt needs to increase in times of economic depression and hardship. Government debt can then be used to put people back to work and provide a general amount of economic stimulus.

Then, governments need to work hard to pay off at least a portion of that debt in times of economic prosperity. It is clear that much of the world is reaching that period now. International leaders need to be devising taxation and spending plans that can start to reduce the world’s debts and deficits before another recession occurs and they need to rise again.

What needs to happen

Countries have to gain control of their deficits during periods of sustained economic growth such as this one. They should raise taxes on their citizens and, if that is politically impossible, they should step up enforcement and eliminate as many loopholes as possible. Countries around the world are starving for revenue. They have hundreds of billions of dollars stored away in tax shelters that are completely immune from the influence of countries. There are many steps that the nations of the world can take the reduce the influence of these tax havens.

Currency Structure

In addition, countries need to look closely at their currency structures. Some currencies like the euro need to become more flexible in order to help smaller European countries pay off their massive deficits. Finally, countries have to be careful with their massive spending projects. They should primarily spend money in order to build up their own countries and the potential of their citizens. Debt should only be taken on to pay for the poor or to rebuild the roads and bridges that countries need to thrive.

Global debt may not be the catalyst to another financial crisis. There were almost seven decades without a major global recession and there is little indication that there will be another one anytime soon. But global debt can still become a major problem for the country and its economy. Global debt could mean the difference between a flourishing global economy and one that is constantly teetering on the brink of budget cuts and collapse.

4 Ways Rising Stocks Can Affect The Housing Market

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The stocks markets have been registering lots of volatility over the years, and this scares many investors a lot. This kind of panic among investors all around is bound to have great effects on to other industries too. Although there aren’t any complaints in the housing market about the same, they fear these effects are going to reach all the way deep into real estate investment too. Some things in the stock market would affect the housing market directly.

Financial Institution’s Interests And Lending Rates

The stock and the housing markets get into direct relationship through the credit people have to take up when buying homes. As most people wouldn’t afford full amounts at once, they have to pay a portion then approach their banks to cater for the rest through the credit program. Depending on the investment time and the health in domestic economies, the interest rates in these can either go up or down. The good and safe situation is when there is low volatility. Banks at this point have confidence in the borrowers and their capability to repay their loans and hence, they lower the interest rates. The high volatility in the markets on the other hand only proves uncertainty in the market; hence the banks increase their interest rates. All these changes are brought about by the increase or lowering of the stock market.

Encourage Investors In The Housing Market

There is another key correlation between the stock market volatility to an investor’s decision in investing. When the figures at the stock market go up, they encourage investors and more so people that would love to buy a home also do so then. When these figures fall, they make investors pessimistic and fearful of investing then. This is a good example of how stocks directly affect the housing market. An investor buying a home when the stock market indexes are going up can be taken as an asset that would even earn you more cash if sold off but the same bought during the low stock season feels like a liability. As the above effects take place in property buyers, there is a significant amount of such effects in the sellers too. By studying the stock markets, they would know when bets to advertise and sell their properties and when to hold back and wait. The banks as well determine their interest rates on mortgages by studying the stock market.

Demand And Supply Of The Houses Don’t Balance

The variation in the stock markets might create what investors call a housing bubble. This is a situation where builders keep building as many houses as they can, but the buyer’s demand keeps falling. Even though in falling stock markets, the interest rates are normally going up, there could be a remedy to all of this. When there are so many unsold properties compared to the number of prospective buyers, the lenders in this situation would have to change their policies and offer better terms to attract buyers. If the number of prospective buyers was higher than the properties in the market, the interest rates would have to go up to maximize the profits.

Huge Down Payments Required From The Prospective Property Buyers

When there is high volatility in the stock markets, the buyers are forced to pay up huge down payments before the financiers can approve the buyer’s mortgage request. This could be because of the low-interest rates getting charged at that time. However, the increase in interest rates discourages the taking of mortgage loans by the housing market investors. In this situation, many would rather look for funding from other sources, for instance, selling their assets. The stock market also affects this situation as well. In such a situation, the value of the property drops due to bad economic times and hence making it all hard again to sell assets and come up with enough equity to buy an investment property.

As the reasons above clearly state, it is true to say stock markets determine every move in the housing market industry. The prospective buyers would want to wait until the stocks re to his/her favor so that to make a profitable investment. The seller and the general property owners also study the market to make sure they also make profits after selling off their houses. The bank s and the financial institutions study the stocks as well so that to determine the amount of interest to install on any particular mortgage loan. They study the stocks also to determine the capability of the buyers to repay all their loans.

Around The World – Investing In Foreign Currency

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Tweed-Economics

The global currency market is by all estimates the largest liquid financial market dedicated to currency trading. The market is largely unregulated and private with no intermediaries to guarantee compliance with regulations. According to Investopedia, the most popular currencies on the market are the US Dollar, the Euro, Great British Pound and the Japanese Yen. 

The US Dollar tops the list as it is considered an intermediary in triangular currency transactions and the unofficial reserve currency of the world. The Euro is a major currency used by many countries in the Eurozone, including Germany, France and Italy. The currency also ranks as the second largest reserve currency and the most traded after the US dollar. The Japanese Yen is easily the most traded currency in the Asian continent, especially in the Pan–Pacific zone. 

How to trade in foreign currency 

With the advances in technology, foreign currency trading can be conducted from anywhere in the world. The leading currency trading centers of the world include New York, London, Tokyo, Frankfurt and Hong Kong. Because of its vast size, a number of entities have been established to promote the trade. According to the Balance, online brokerages and margin trading accounts have in the recent times grown their market share in an industry dominated by banks and institutional investors. Investors can make the most out of the trade by understanding the underlying risks and benefits of currency trading. Below are key benefits of trading in foreign currency: 

• Access to a large and liquid global currency market 

• 24-hour operation and diverse trading styles 

• Opportunity to diversify the investment portfolio 

• Low cost of trading 

• No central exchange 

In terms of volume, the foreign currency market averages over $5 trillion in daily trading. The two main risks of trading in foreign currency are high leverage and high levels of volatility. High levels of market volatility are often caused by negative economic reports and weakened markets. When volatility becomes an issue, central banks are sometimes forced to intervene in order to stabilize the currency and the market in general. The other downside is that foreign exchange market makes very small increments, which tend to create high leverage. To improve long term returns and mitigate the risks, an analysis of risk-management strategies is crucial. 

Foreign currency trading outlook 

A number of platforms and instruments have been developed to enhance currency trading. Forex investors can invest in currencies either directly or indirectly using vehicles like Exchange Traded Funds (ETFs). ETF funds usually buy and manages currency portfolios on behalf of investors using effective trading tools like futures contracts and swaps. Investors who do not have a lot of money to put down can benefit from shorting strategies deployed by ETFs. The ETF is highly recommended for Investors who are not versed with the intricacies of foreign currency trading. 

For the inquisitive investor, the three leading ETFs for foreign currency trading are CurrencyShares, Wisdom Tree and ProShares. These ETFs trade in a wide range of currencies, including Chinese Yuan, Brazilian Real and Australian Dollar. If you are a seasoned investor, foreign currency trading can be interesting because you can make a side bet against the currency you are holding. Owing to insurance backup, Forex investors also have the opportunity to trade weak currencies without suffering undue negative exposures. 

According to a Forbes magazine report published in 2017, investors can make money in a volatile market through currency hedging. The strategy provides protection against losses emanating from negative currency movements, which often lead to uncertainty. For instance, as China moves into the marketplace with its reserve currency, investors worried about the future strength or weakness of the currency against the Euro and the dollar will find solace in hedging strategies. Concerns about China are heightened by prevalent stock bubbles, unpredictable real estate market and lack of transparency about the country’s debt. 

For investors in Europe, the prevailing low interest rates offers a perfect opportunity to off load currencies on the futures market at rates higher than the spot prices. The two leading currency hedge funds in the world today are WisdomTree Europe Hedged Equity Fund and iShares Currency Hedged MSCI EAFE ETF. According to the Forbes magazine, there are about 89 exchange traded funds with currency hedges aligned to their portfolios. These exchange funds account for about $40 billion of the $450 billion held in foreign stock ETFs. 

If you want to achieve long-term success in foreign currency trading, you need to learn continuously; acquaint yourself with prudent capital management techniques and understand the risks that lay I the way. It is also important to persevere because success may not be achieved overnight. For personalized training and assistance, you get in touch with an investment advisor who understands foreign currency investment and portfolio management.