1. Syria - The prospects of war have greatly diminished after Russia’s President Vladimir Putin proposed that the chemical-weapon stockpiles of Syria be subject to international inspection. US President Obama immediately responded in kind. He urged Congress to put a vote on a military strike against the Damascus regime on hold, pending further talks on weapons inspection in Syria. The world may have narrowly averted a crisis of epic proportions, which would have seen the US launching a military strike over allegations that the Assad regime used chemical weapons to kill over a thousand people. But we have to keep a close eye on any developments.
2. The US Fed’s tapering of its QE The Federal Open Market Committee will meet on Tuesday and Wednesday next week to determine whether it should withdraw the asset-purchasing programme under quantitative easing. Most market forecasters were initially quite sure that the Fed would reduce its bond purchase by $10-$20 billion. Now opinion appears to be divided due to the fragile US recovery. If the Fed were to taper QE, it would create a global tightening. If it does not, financial markets will continue along their bubble-inducing paths.
3. US debt ceiling debate
By mid-October President Obama and the Republican-controlled Congress will have to strike a deal on raising the public debt ceiling, which now stands at $16.7 trillion. Obama and his team have already sent out a clear signal that the debt-ceiling package is not negotiable. The Republicans smell blood. We all recall how the last-minute debt-ceiling deal last year helped avert the federal government from defaulting. This October we might see a repeat thriller.
4. The German election
September 22 will see Germany will hold an election, with Angela Merkel expected to be returned as Chancellor. All is not certain, however, as she will have to form a coalition government. One thing that will be clearer is the next German administration’s stance on the future of the euro.
5. Gold
Gold peaked at more than $1,900 an ounce in September 2011 before tumbling to $1,198. But now it is wobbling at the $1,360 level. Gold is “real money”, unlike paper money, which can be printed by central banks. Will gold make a comeback as the world’s real currency?
6. BRICS’ move
Brazil, Russia, India, China and South Africa have attempted to create a new financial order, moving away from the dollar regime. They have set up $100 billion in funds to shore up their currencies during a time of balance-of-payments crisis. This amount may look small, but it marks an important symbolic move as the BRICS chart a fresh course of their own, distancing themselves from the dollar.
7. US bond-market bubbles
The Bank of Thailand recently sold down its US Treasuries holdings by $18 billion, or 27 per cent of its entire US Treasuries holdings. Other central banks are doing the same, heading to the exit to cut losses given the upward pressure of interest rates. If the US Fed loses control of the interest rates, chances are we’ll see a bloodbath in the bond market.
8. Euro-zone crisis
In spite of talk of a euro-zone recovery, unemployment remains high. Germany might not be able to absorb the euro bail-out for too much longer.
France, the second-largest euro-zone economy, is not in a position to help out its partner countries if further bail-outs are needed. Spain, Greece and Italy are now living in hard times.
9. India, Indonesia, Brazil
These three are reeling under a severe crisis. Their stock markets and currencies have fallen sharply ever since the Fed signalled it might taper its QE. Things have slightly improved of late. Thailand is next in line in this region as a country vulnerable to capital outflow. They are all hostages of the Fed’s monetary policy.
10. The derivatives market time-bomb of $600-$700 trillion
Nobody knows what is going on in the market, which is not properly regulated. Most derivatives are tied to interest-rate movements.
If interest rates were to rise sharply, some banks might fall, creating a domino effect.
These 10 big events of our time need to be closely monitored if we are to navigate a course through stormy economic waters.
