globalEDGE Blog - By Author: Himani Rajput

After a long period of droughts in Zimbabwe, persistent rains in the region renewed hope for farmers across South Africa that food shortages might finally let up. A lengthy drought seemed to be the worst of the agricultural industry's problem, but a new pest has taken over those fears and multiplied them. An outbreak of armyworms in countries like Zimbabwe, Zambia, and Malawi threaten the crop yield for the coming year.

Greece has been in a state of economic uncertainty and crippling levels of debt since the 2008 financial crisis. Recently though, it’s been estimated that the debt levels will skyrocket and result in Greece owing nearly triple its annual output. Save for any substantial debt relief, the IMF estimates an EU-headed aid program of 86 billion euros will be needed to temporarily keep Greece afloat.

The Aussie real-estate market is an increasingly mercurial frontier for investors and home-owners alike. Housing markets are no stranger to high rates of default and bad debt, but Australia’s uniquely volatile real estate business has been steadily oscillating toward bubble status since 2001. The whole world was crippled when America’s housing bubble, launched to dangerous heights by massive collateralized debt obligations and junk bonds, eventually exploded in a manner that shook the global economy. Australian default rates are nothing short of shocking and have narrowly avoided causing American 2008-esque crashes in the past several years. The uncertainty from this part of Australia’s economy adds fuel to its fire, but other times it serves to strengthen its own currency and outperform other sectors of the global economy. But everything has a cost, and though Australia might not be facing the immediate risk of a bubble, a slow and painful demise is usually in store for those who mistake healthy credit margins for insurmountable housing debt.

As early as last year, Japan’s Prime Minister Shinzo Abe announced that the country could expect a rate hike in consumer tax rates. Last year, it was slated to take effect beginning 2017, but the agenda has since then been moved up quite a bit. Economists are predicting the economic plan may take place as early as late 2016 or very early 2017, as opposed to the previously believed mid to late 2017 timeline. Japan is required first and foremost to think about its own economy and whether or not its consumers could handle another rate hike, but other global factors have become more pressing since Abe’s initial announcement in 2015.

Atiur Rahman, the governor of Bangladesh’s central bank, stepped down Tuesday after over $100 million was stolen from the bank’s account at the New York Fed last month. Approximately 80% of the stolen amount was transferred to personal accounts in the Philippines, while the rest made its way to a bank in Sri Lanka. Official codes were used to facilitate the theft, and a representative from Bangladesh’s ministry of finance confirmed that the currently unknown criminals had the necessary codes to authorize the transfers. The American Fed has been accused of irregular activity, while questions were raised about the quality of security on the Asian country’s end.

Nigeria needs money. Specifically, it needs $3.5 billion worth of cash flows for their $15 billion government driven deficit. The recent global oil glut has left Africa, and especially Nigeria, competing for oil contracts in Asian markets. Other countries, like Kenya, are facing similar untimely crises as the decade-long commodity boom is coming to an end. Before, growth in Africa relied upon the abundance of land, which left no necessity for advanced infrastructure or substantial growth in other sectors. Dependence on uncontrollable factors, it seems, has left Africa’s largest and most advanced economies in the early stages of economic stagnation.

After a tedious war that took a toll on its people, Chechnya remained under the control of Russia following its annexation. After a very close outcome on the 2012 referendum, Scotland remained a loyal entity of the Queen’s monarchy. While both attempts of secession were predictably unsuccessful, it seems Spain’s biggest problem isn’t going to be a gruesome war or rioting masses in the streets. If Cataluña is successful in efforts of secession from Spain, it’ll be out of the frying pan and into the fire for the Iberian democracy.

Swiss financial affairs have long been a thing of mystery and wonder. Aside from the general disdain expressed by foreign governments toward Switzerland’s public and private banking institutions, the Swiss franc is not a coin that lends itself to be easily shortchanged. Swiss bank accounts have had fame and notoriety in the past for stark confidentiality agreements as well as attractive investment management options which allowed for a growing number of Swiss bank accounts to be opened by the likes of white collar criminals. And that’s exactly where the misconception is - Swiss bank accounts aren’t popular because of anonymity, they’re in demand because of the unparalleled financial security. One of the biggest reasons these bank accounts are able to thrive so well in such an isolated economy is because the Swiss franc has been a fierce champion for growth and stability. These financial tenets are more easily boasted than achieved, but against all odds the Swiss currency has provided a fiscal anchor in the sea of global economic uncertainty.

With the holiday season on the near horizon, it’s crunch time for people across the globe to find the best deals on presents, especially those that aren’t usually affected by seasonal sales. This past weekend and subsequent “Cyber Monday” marks the annual event of the consumer discretionary sector marking down retail goods, offering exceptional savings for a very limited time. Generally, a jolt in sales due to Black Friday is expected to be a harbinger of a relatively healthier Q4 earnings report, especially if previous periods had stagnant growth or lackluster earnings. The holiday shopping season is vital to the fiscal success of many retailers and yet historically, sales during this time of year don’t follow any particular pattern or have any distinctly profound impact on overall economic trends. But for many, Black Friday is a time of year that can make or break a company’s financial statements.

Over the duration of its rather short history, Bitcoin has gained popularity and economic clout but also its fair share of skeptics. The peer-to-peer lending system utilizes data mining, based on the idea that there is a finite number of bitcoins, and flaunts its decentralized network. Basically, there is a certain point in time when all existing bitcoins will be extracted and there is no single entity, like a central bank, that has the ability to generate more. This important distinction has led to its designation as a commodity by the Commodity Futures Trading Commission (CFTC) in the United States. Regardless of its status, the digital currency has been rallying for about two months now, thanks in part to acceptance by financial institutions like Morgan Stanley and Goldman Sachs. With a current buy price of about  $400, the money system has a record $1 billion invested in it.

Japan’s recent recovery, frail as it is, is doing far better than the failing endeavor it’s been pegged as in mainstream media. Understandably, claims on the many faults of Prime Minister Abe’s Quantitative Easing policy have been warranted. This year alone, Japan has faced a shrinking economy in its second quarter and came uncomfortably close to the same designation in the third quarter. Most notably, inflation has been on a steady decline since April and has since stabilized but remains alarmingly close to zero. Dismal as the outcomes have been thus far, the island nation is inching closer to its goals.

Although it’s been a long time coming and an even longer time expected, the Fed decided not to raise rates at the most recent FOMC meeting. This news comes as a bit of a disappointment to investors and economists, especially after the past week of downturn in American stock markets. However, it is the emerging markets that have experienced notable distress. Although some of the issues many of these nations face are chronic or fundamental inadequacies, the currencies have taken the hardest hit.

The Federal Funds Rate (FFR) is designed to either stimulate saving or spending based on the level of economic growth. Following the 2008 financial crisis, the rate was slashed in attempt to temporarily buoy the markets, but the current economy is calling for an increase in the rate. The series of rate increases proposed by the Federal Reserve were set to be enacted sometime around fall of 2015, although more recently analysts predict that the September 16-17 meeting specifically will reflect any actions taken by the central bank. This rate hike, planned for quite some time now, is becoming increasingly ambiguous as the Fed faces tension following the recent succession of turbulent economic events. Chief among these stressors is the IMF, which is urging the Federal Reserve to cut a little slack for the sake of the global economy.

The ECB is still struggling to keep Greece above water, while China is dealing with its market crash. The surprise yuan devaluation has agitated global markets further. When the People’s Bank of China (PBOC) decided to weaken its currency to get back on the right track, the USD, JPY, and EUR have been forced to adjust accordingly. Anytime a nation deliberately interferes with its currency, ripples are sent through the markets. China, with its 1.9% devaluation, has made waves. Last year, it was Europe in this position, and in 2013 it was Japan’s Abenomics with a weak yen at the helm of its policy that took center stage. With China’s recent move, countries all over are engaging in competitive devaluations to protect currencies. With an increasing number of countries being involuntary drawn in and a few apparent losers already, this is shaping up to be quite a turbulent currency war.

The fire may have died down in China, but the burns it left in its wake are still raw, as the Chinese government attempts to bring back some stability by weakening the yuan. Devaluing its currency is proving to be rather injurious for Australian, New Zealand, Singapore, and Taiwanese dollars, as they took a rough tumble earlier this week. Luckily for America though, this drop has proven successful for the USD, as investors are getting bullish on its outcome in coming weeks. But this move on behalf of China’s bank is not to be overlooked or underestimated, since it is being hailed as a one-time fix.

Commodities are generally a good measure of how the market is doing overall; how abundant and fluid certain resources are can explain a lot about the economy and its patterns. When so much of the world, independent and corporate investors alike, has deeply vested interests in such a large market-one whose health is constantly up for debate, it is difficult to know when the warning signs are considerably worrying. Internationally, the world is facing a massive supply glut with Middle Eastern producers turning over oil at record production rates and the recent emergence of other serious oil producers, including the U.S. Even with such steep price drops, petroleum is not the only factor. One commodity index in particular, that tracks an array of different commodities, is currently trading far below recorded levels from before December 2008. Prices drop, the market recalibrates, and volatility is appeased, if only temporarily. But with recent global events surrounding Greece banks and the Chinese market bubble, perhaps it is time to look below the surface and into the past. 

For the first time in nearly 80 years, Mexico is holding an oil auction in which energy firms from all over the world will compete. Is this bid for oil going to hold lackluster results or is it the key for Mexico's energy reform? Petróleos Mexicanos, mononymously known as Pemex, virtually controls the entire nation’s oil industry. Nationalized in 1938, Pemex was designed to push out external parties like the U.K. and the U.S. following major labor disputes and their ostensible domination of the energy markets. Therefore, the auctions being held are a step, or leap, in the opposite direction. The bidding marks the first time ever that private oil companies are being allowed to set up in Mexico and that oil contracts are being sold off. For a country whose oil industry has been monopolized for 77 years, the auctioning offers a world of possibilities to both Mexico and its prospective investors. To be exact, the sell-off is estimated to draw in a revitalizing $62.5 billion for the Mexican economy.

As the old adage goes “the only way to go is up after rock bottom,” Greece seems unable to stop pushing its economic limits. Despite its previous bailout programs designed jointly by the IMF, ECB, and European Commission, relief arrived coupled with harsh measures. Austerity packages were the fine print for Greece’s lending agreement; yet, unemployment has checked in at 25% this year, while most of the bailout money went toward settling international debt rather than jump-starting the economy. It is perhaps this ineffective past experience that has left Greece resentful toward the idea of another double-edged bailout measure, which is why Greece is currently celebrating its new-found and likely brief freedom from dependence on external problem solvers.

From the free silver policy issue of the 1800s to the Bretton Woods agreement of 1944, America has always had differing views on how the dollar should be valued and leveraged, as well its role in the global currency exchange. Ever since the eve of World War II, the U.S. dollar has had notable domination in the international marketplace. In nearly all transactions made using more than one currency in the past three years, the dollar was required as a conversion factor to complete trades. The U.S. dollar, for quite some time now, has been the world’s reserve currency. In Currencies After the Crash, Sara Eisen explores the impact of the world’s strongest currencies, the possible ramifications of highly leveraged monies, and the perilous yet profitable realm that is the foreign exchange market.

Globalization often gets a bad rap and serves as the punching bag for many international issues. Because of this harsh under appreciation of the increasingly influential force that connects the world, global trade also comes under fire. The reliance of superpower nations on multinational corporations is perceived more frequently as a weakness due to inescapable interdependence. In A Splendid Exchange, William Bernstein manages to provide the reader with insight on key economic concepts found in trade since the origin of the first silk passages. Refreshingly honest, Bernstein accounts the major events and development of the global market, theorizing that trade is the single common denominator through past eras. Often villianized in terms of the global marketplace, trade is something that has shaped the world we so comfortably inhabit in the present.

Currently, the United Kingdom is going through its highest level of political elections, the race for prime minister. The frontrunners are the sitting PM David Cameron and the Labour Party’s Ed Miliband. Cameron, who’s long been known to favor the rock bottom interest rates that the country is currently experiencing, is the only PM in the country's history since the 1950s to hold office without even the slightest fluctuation of the interest rates. However, the anticipation of a changing political horizon brings immense speculation in both domestic and international markets.

Since early 2014, the U.S. Central Bank has been in the process of easing the economy into a rising interest rates program. In an effort to contract the economy while it’s still recovering, the main goal of this initiative is to gently maneuver the United States into a more stable fiscal state, and out of the transitional zone it is currently in. The Federal Funds Rate (FFR) has been flat at a historic rock bottom 0.25% for about six years now, following the financial crisis of 2008. Economic analysts and investors alike are dubious about the unprecedented situation in which the Fed will try to raise rates from such a low point, partially playing it by ear.

Late last year, the RUB-USD exchange rate dipped significantly, which carried on into 2015 with the ruble’s unfaltering depreciation against the dollar. This now full-fledged currency crisis has Russia’s Central Bank bailing out its private banking sector and reinstating a unique quantitative easing strategy that aims to spur foreign investment and have a positive impact on GDP. Despite the government scrambling to stabilize its currency, economic recession in 2015 seems inevitable.