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Macro Watch: Flows and A Liquidity Gauge

By: Gordon Long | Wednesday, February 5, 2014

Central Banking and Shadow Banking

SPECIAL GUEST: Richard Duncan

26 Minutes, 25 Slides

Richard Duncan

Richard Duncan has served as global head of investment strategy at ABN AMRO Asset Management in London, worked as a financial sector specialist for the World Bank in Washington D.C., and headed equity research departments for James Capel Securities and Salomon Brothers in Bangkok. He also worked as a consultant for the IMF in Thailand during the Asia Crisis. Richard has appeared frequently on CNBC, CNN, BBC and Bloomberg Television, as well as on BBC World Service Radio. He is also the author of three books on the global economic crisis. The Dollar Crisis: Causes, Consequences, Cures (2003); The Corruption of Capitalism (2009); and, The New Depression: The Breakdown Of The Paper Money Economy (2012).

Richard believes we no longer have Capitalism driving economic growth but rather Creditism. In the past, economic growth was driven by saving and investment. It doesn't work that way any more. Now, the economy is driven by credit creation and consumption. Capitalism has evolved into Creditism! As a result credit growth today drives economic growth, liquidity determines the direction of asset prices and the government attempts to control both to make sure that the economy continues to grow.

Understanding this new dynamic is critical to making investment decisions within the current Fiat Currency regime environment. In this video Richard Duncan outlines what he believes the Federal Reserve will be forced to do in 2014 and 2015 to avoid as US and potential global recession. More Quantitative Easing is on the horizon.

The 2% Credit Growth Floor

Since the end of WWII, every time the US has fallen below 2% credit growth the US experienced a recession and prompted a shift in Monetary Policy. The tenuous global economic environment couldn't handle a US recession and the Federal Reserve is acutely aware of this and will do everything in its power to forestall such a possibility.

Total Credit and GDP Growth

The Macro Watch Liquidity Gauge

The Macro Watch Liquidity Gauge Including QE

$2.3 Trillion in Liquidity Required

Richard analytically illustrates why the Federal Reserve must add an additional $500B to $1T in liquidity over current "Taper" estimates. Investors shouldn't bet on QE Ending in 2014!

Based on the current Fed Taper schedule, Liquidity will become tight in the third quarter of 2014 and there will be a significant liquidity drain beginning in the fourth quarter. If the Fed sticks with this schedule, interest rates are likely to rise by mid-2014. Higher interest rates would cause a fall in property prices, stock prices and net worth, which would cause the economy to fall back into recession. To prevent that, the Fed is likely to create more fiat money through QE than its taper schedule suggests.

This is must listening for serious investors.


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Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

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