I said I’d talk about cockroaches separately, but it was a day where cockroaches became a problem. There seems to be a renewed sense of anxiety about small banks in the U.S. However, the problem is– some of it is triggered by small banks themselves, but also the insolvency of private equity loans that have been around for a long time. Big banks in the U.S. are stronger than ever because of their abundant reserves and strong capital regulations. But the case of small banks and non-banking financial institutions may be different.
For your information, as I quoted in an essay a while ago, ECB President Lagarde warned against tightening regulations on non-banking financial institutions. When Minister Koo Yun-chul made a comment at the G20 Finance Ministers’ Meeting the previous day, he mentioned the state’s response to loans from non-banking financial institutions along with increasing state spending on productive industries. And the fact that this is connected means two things. One means that this could be a problem. When you think about it, I think it may not be a coincidence that Powell suddenly mentioned the suspension of quantitative austerity two days ago. The other is that the Fed, the ECB, and the G20 are aware of that. I don’t know how I’ll respond to this, but it’s noteworthy that I’m aware of it.
Then, the rate cut, or the suspension of quantitative tightening, could proceed at a faster pace. So, early this morning, the U.S. interest rates in both short and long term fell. Then wouldn’t that make us worry about prices right away? Nominal interest rates are coming down, but… Inflation expectations can be high. Does that mean real interest rates are going to fall? With real interest rates falling… If the benefit of real interest from paper money is reduced… Paper money becomes less attractive… gold, the real currency, opens your eyes on the other side. Expectations for real interest rates to fall… With this, the price of gold was going up another level.
I’m going to connect you with a little more details in my weekend essay… The schedule is spectacular from now until early November. Today, I would like to conclude by informing you of the schedule. This week, the G20 Finance Ministers’ Meeting and the IMF Annual Meeting are scheduled. Finance ministers and central bank governors from all over the world are meeting… For your information, the previous day, Finance Minister Bessent mentioned negotiations with China in an interview… China also has key figures attending this meeting.. And there were key people who could negotiate on international trade, and we talked about the possibility of dialogue here. Exchange rate war… And I hope that some smooth solutions will come out in a confusing situation due to tariff conflicts and finally pressure on investment in the U.S.
And next week, China’s Four Plenipotentiaries are scheduled to be held, and this is where we’re going to frame the new five-year plan… We will be able to see the resumption of large-scale infrastructure investment and the Chinese authorities’ stance on high-tech industries. And I think that since the meeting will be held between the G20 Finance Ministers’ Meeting and the APEC Summit, China’s internal position will also be summarized to a certain extent.
And as I said, APEC will be held in Gyeongju in late October and early November. Before and after that, the leaders of each country will hold talks… And the summit between Trump and Xi will be important. We also hope that in the midst of a number of pending issues, a reasonable direction for the $350 billion investment can be found. On top of that, negotiations between Trump and Putin on the Russia-U.S. war are gaining momentum again. Anyway… There are going to be a lot of issues. And just before that, on October 30th (Korean time), the FOMC for October is waiting. I think the possibility of a rate cut is very high. If there is a strong feeling that the risk of the credit market is ignited… I think the Fed could consider quantitative tightening once again, and the ECB and the BOJ have a meeting that day, and I’m more interested in the BOJ. And even if we don’t raise it this time, if we think about the December hike… I don’t think they’ll hint to a certain extent… as much as the BOJ gives an economic outlook… The impact of growth and price forecasts reflected here on the market… I think this could have a pretty big impact on the market.
Now that I’ve written it down, I think the next two weeks will be interesting. There’s a lot of news coming in… Let’s take a little bit of a long breath in the middle of the news. Essay line. Thank you.