Nikola's Trading Lab

Good,hehe

Javicu se,hvala ti puno.

Srecno trgovanje

OK,it's NFP day.

It's likely that results will be again disappointing due to weather or some other heavenly cause.
Labour market is really facing problems.
What to trade or what to look?
EUR/USD is way overbought,can we see a rise to the 23.10.2011 high ?

I think that USD/JPY is the better deal to trade at this moment.
Euro bulls are back (with justification) after series of good data and economic improvment.
There will be massive moves today.
Also there is CAD unemployment rate and so on .

February non-farm payrolls 175K vs 149K expected

GOOD for USD.
But unemployment rate 6.7%.

http://www.bls.gov/news.release/arch...t_03072014.htm

One good article about scalping.

http://www.dailyfx.com/forex/educati..._Strategy.html

I will post link,because I don't want that your screens remains "blank" with jus dry-text article WITHOUT CHARTS.

I recommend this article for each trader to consider this way and express opinion here about it, maaaaybe.

Do you care about momentum or you are "less-momentum" dependent trader (game of words) ?

I don't like English sometimes becuse it lose some of good sense when I try to translate some good Serbian phrase to English,HOWSOEVER!

I need to BOOST interaction on this thread.

I'm calling all traders to interact.

From tomorrow I'm starting with testing "brand new system"-sounds like marketing ad hahaha LOL

But it's nottt! We will all work on it later!

Not seriously it will be fun.

Schedule is filled and that is always what I want really,to enjoy many things ( little moral)

Later today I will post one article,which is mainly base on economy (BUT also with good measure related with trading).

I had intention to publish my article tonight but it's "somehow" extended by A.SMITH's INVISIBLE HAND!
So, I will continue with writing and hopely publish article tomorrow.

Cheers

Here is little interesting article about China's first DEFAULT.
Enjoy it till I finish my article.

Definitio of DEFAULT
The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt.

The failure to perform on a futures contract as required by an exchange.

China should allow companies to default on their bonds, an external supervisor at the Bank of China said today, after a solar-cell maker couldn’t repay full interest on its debt.
“We need to be more accepting and allow such defaults to happen,” Mei Xingbao told reporters during a meeting of the Chinese People’s Consultative Conference in Beijing. “The debtor must be responsible for his own debt. He must tell the investors that there is risk involved in the product.”
Mei’s remarks offer add to indications that China’s Communist Party leaders will allow more debt to go bad rather than intervening to bail out investors. The party agreed last year to let markets to play a more decisive role in the economy.
China’s onshore bond market experienced its first default yesterday when Shangai Chaori Solar Energy Sci and Tech Co. missed a deadline to pay the full 89.8 million yuan ($14.7 million) interest due on its bonds. A default would be a “wake-up call” and advance the growth of China’s bonda market, Moody’s Investors Service said in a report e-mailed yesterday.
Previously, the government and corporations would ask the People’s Bank of China, the central bank, for a new loan to pay back debt as a way to maintain stability in society, Mei said.
‘Good Start’
“In a more market-driven bond market, this should not be the situation,” said Mei, former president of China Orient Asset Management Corp. Orient was one of four asset management firms set up by the government in 1999 to buy bad debts from the country’s biggest banks and help clean up a financial system on the brink of bankruptcy.
The decision to let Chaori default was a “good start” toward helping the market price risk,Liu Mingkang, former chairman of the China Banking Regulatory Commission Chairman, said at the CPPCC meeting today.
“I have proposed that we shouldn’t have zero default -- otherwise how are we going to rate and price bonds,” Liu said. “ It’s a good signal. We don’t have enough data to tell if there’s systemic risk, but we have to stay alert.”

It is interesting because China shows some not-conservative policy.
That is positive in my opinion.
Default is very tricky,as credit(debt) but if we use it on the proper way it could clean financial system.

INTRO
Some words before I start to write about economy
Let me specify some things
I MUST say that I will simplify all so everyone (those who are less familiar with economy) can follow
It will be easy reading text and adapting
THIS IS VERY IMPORTANT ARTICLE!
For many reasons this article is important!
Mainly,because it is a good starting point for those who are less familiar with economy.
And if you want to read and follow upcoming stuffs on my thread about economy you will you need to read this.
I will mark this on thread as very IMPORTANT. [ok?!]
So if you want to properly read (learn) and enjoy this thread on the best possible way,this is starting point

Thats all from intro.
I will say that I put all efforts to make this simple simple as I said and I hope you will ENJOY,learn or find something as profitably.
Let's begin

I don't know how to sort all this topics but let's pick this way.
This article will contain
1.Transactions
2.L/S debt cycles
3.Central Bank policy
4.Credit/Debt
"Mixed meat" ,but I will not split topics.
I will write as one part,more like story!
I WILL USE ONE SIMPLE TEMPLATE FROM MR.DALIO BECAUSE I THINK IT IS GOOD AND SIMPLE FOR BEGINNING.
Although it will be mixed meat!

There's a lot of discussion about economy and the opinions and point of views are various.
I personally ASK YOU KINDLY to not take any of that analysis FOR GRANTED!
We are looking for QUALITY!
How can we get quality knoweledge?Simple by thinking with our OWN HEAD ,watching,using and learning from several sources.
Quality knowledge can only be obtained by strong facts!
Strong facts come from proven,tested,objective and real consideration.
Subjectivity is the thing that mostly choke reality.
Additionally,read and look on this article also as just a one FACT.
Good economist (as scientist) watching,considering about what can be true.
When things repeats itselfs many times and prove they become a facts.
So,there is a lot of different view.
I had to mention all this.
My opinion and look on the economy is like it is a mechanism.
Some small things happens all the time and then become stronger and gain in importance.
You will see also how the things are predictable
In economy it's all about transactions and few simple parts
Interesting thing is that those transactions are all driven by human nature!
They create 3 main force:
1.Productivity Growth
2.The short term debt cycle
3.The long term debt cycle
Those 3 part are really good tool for tracking a economic conditions
We will come to that.
Let's continue with TRANSACTIONS!
Economy is the simply sum of the transactions that make it up
We make transactions all the time and that is the thing that happens all day,all night over and over
Everytime we buy something we crate a transaction
EACH TRANSACTION HAVE A BUYER EXCHANGING MONEY OR CREDIT WITH A SELLER FOR GOODS,SERVICES OR FINANCIAL ASSETS.
Credit have same nature as money,we spends redit just like money.
Adding together spent money and the amount of spent credit we get TOTAL SPENDING!
AND THAT IS VERY IMPORTANT!
BECAUSE SPENDING DRIVES THE ECONOMY! (as many economist like to say)
And when we divide the amount of spend with the quantity sold we get PRICE.
Try to thing about that and elaborate that picture in you head.
[power of imagination]
You meet term price everywhere but you never thing about it this way.
This is the economic approach.
OK,transactions are building block of the economic machine.
They boost spending.
I'm buying you are selling and opposite,it's all about that.
Cycles and forces in the economy are driven by transactions.
AND IF WE UNDERSTAND transactions then it's "easy" to understand a whole economy.
All markets consist buyers and sellers.
A market consists of all the buyers and all the sellers that making transactions for same thing.
There are millions,billions,trillions markets around us.
Car,stock,wheat,sugar...all kinds of markets.
AND ECONOMY CONSISTS OF ALL THE TRANSACTIONS IN ALL OF ITS MARKETS.
If you addp up total spending and total quantity sold in all that markets you will get all you need to know to understand the economy.
People,business,banks and governments all engage in transactions,exchanging money and credit for goods,services and financial assets.
Here we come to the important thing,there is two biggest buyer and seller-goverment,whick is consist of two important part:
CENTRAL GOVERNMENT -that collects taxes and spends money
and CENTRAL BANK-which is different from other buyers and seller because it controls the amount of money and credit in the economy!
It does this by influencing interest rates and printing new money!
As we see,because of this Central Bank is important player in the flow of credit!
So let's talk about credit!
Credit is the most important part of the economy,and PROBABLY THE LEAST UNDERSTOOD.
It is important because it is the most volatile part.
Like buyers and sellers makes transactions,so do lenders and borrowers.
LENDERS usually wanto to make their money into more money and borrowers usually want to buy something they can't afford,like car for example ot they wanto to invest in something .. starting business and so .
Credit can help both lenders and borrowers get what they want.
Borrowers promise to repay the amount they borrow,called the PRINCIPAL,plus an additional aomount,called INTEREST/
When INTEREST RATES ARE HIGH,there is less borrowing because it's expensive.

In opposite when interest rates are low,borrowing increases because it's cheaper.
When borrowers promise to repay and lenders believe them,credit is created.
Credit is created OUT OF THINK AIR (as economist like to say)
That seems simple enough but CREDIT IS TRICKY!
Because it has different names because AS SOON AS CREDIT IS CREATED IT IMMEDIATELY TURNS INTO DEBT!
Sword with two razors!
Debt is both an ASSET to lender, and a LIABILITY to the borrower.
So in the future,when borrower repay the loan + interes,the asset and liability disappear and the transaction is settled.
WELL,why the credit is so that important.
Because it's boost spending.
And as we pointed later in the text-SPENDING DRIVES THE ECONOMY.
There is one think you must really understand:
"ONE PERSON'S SPENDING IS ANOTHER PERSON'S INCOME"
Any single dollar or euro (whatever currency) you spend,someone else earns and every dollar you earn,someone else has spent.
AS SIMPLE AS THAT!
From that we come to the WHEN YOU SPEND MORE,SOMEONE ELSE EARNS MORE.
When someone's income rises it makes ledners more WILLING to lend him money because now he's more worthy of credit.
And a creditworhty borrowr has two thing on mind:
the ability to repay and collateral.
Having a lot of income in relation to his debt gives him the ability to repay.
In the event that he can't repay, he has valuable assets to use as collateral that can be sold.
This makes lenders feel comfortable lending him money.
So increased income = increased borrowing,that allows increased spending.
And with RESPECT OF (i must use this term from mathematic) fact that one person's spending is another person's income,this lead us to increasing borrowing ..etz
That whole PATTERN leads to the economic growth and because of that we have CYCLES!
I hope that all this stuffs are clear till now.

Let's continue
In transactions,you have to give something in order to get something and HOW MUCH YOU GET DEPENDS ON HOW MUCH YOU PRODUCE!
Over the time we learned that and that knowledge raises living standards.
That is what we call Productivity Growth.
To be honest,those who were invented and hard-working raise their productivity and their livingstandards faster than those who are complacent and laz.
BUT THAT ISN'T NECESSARILY TRUE OVER THE SHORT RUN!
In the long-term productivity growth doesn't fluctuate much,so it's not a big driver of economic swings.
On the picture above you can see that linke is without oscilations ,it goes up,raises,simply.
BUT BECAUSE OF DEBTS,swings occurs,it allows us to consume more than we can produce and from another point when we acquire it later it forces us to consume less than we produce when we pay it back.
DEBT swings occurs in two BIG CYCLES.
As i mention at the same beginning.
Long-term debt cycles and short term cycles.


One takes about 5 to 10 years and other takes about 75 to 100 years.
Naturally,while most people feel the swings,they typcally don't see them as cycles because they see them too up close ,as day by day, or so week by week.
Come back to the tree big forces and take a look how they are interact and make our experiences.
As mentioned, swings around the line are not due to how much innovation or hard work there is,they're primarily due to how much credit there is.
Lets take a look at economy without credit
In that economy,the only way to increase MY spending ,I need to increase my income,which requires to be more productive and do more work.
it's simple
Increased productiviry is the only way for growth
And back to the fact that my spending is another person's income,the economy grow every time I or anyone else is more productive.
That is express on progression of the productivity growth line.
From other side,we are living in the economy with credits (debts)
and because we borrow ,we have cycles.
It is in our human nature and that is the way that credit works.
Think about borrowing as simply a way of pulling spending forward.
In order to buy something you can't afford,you need to spend more than you make.
To do this,you essentially need to borrow from YOUR FUTURE SELF! (HEHE)
So we are creating peiord of time in the future that we will need to spend less in order to pay it back.
It very quickly resembles a cycle.
Basically,anytime you borrow you create a cycle!
That is true as for individual as for whole economy.
This is why understanding credit is so important because it sets into motion a mechanical,predictable series of events that will happen in the future.
This makes credit different from money.
With money you can settle transactions.
When you buy something,let's for example a drink,with cash,the transaction is settled immediately.
But the different is when you try to buy it with credit.
You promise that you will pay in the future.
Together you and seller crate an ASSET and a LIABILITY.
We just AGAIN CREATE A CREDIT OUT OF THIN AIR!
But asset and liability does not dissaper until we pay back our drink + interest.
After that transaction is settled.
It is interesting because the most of what people call money is actually credit!
(we have about 50 $ trilion of totaly amount of credit in US, and total amount of money is only about 3$ trilion)
I must say here that credit isn't necessarily something bad that just causes cycles.
IT'S BAD WHEN IT FINANCES OVER-CONSUMPTION THAT CAN'T BE PAID BACK!
In economy with credit,you can also increase you spending by borrowing.As a result,an economy with credit has more spending and allows incomes to rise faster than productiviry over the short run,but not over long run.
(I think that you can now slowly make a picture in you hand about difference between long and short term RUN)
However, it's good when it efficiently allocates resources
and produces income so you can pay back the debt.
What matters with credit is how to ALLOCATES RESOURCES!
Good investing!
For example if you buy a hamburger for example it doesn't generate income for you to pay back the debt! (haha,little joke)
But when you buy for example some machine what can generate income,like for example tractor and that tractor let's you harvest more crops and earn more money-YOU CAN PAY BACK YOU DEBT and improve your living standards!
In an economy with credit,we can follow the transactions
and see how credit creates growth.
Let's follow this example:
Suppose you earn $100,000 a year and have no debt.
You are creditworthy enough to borrow $10,000 dollars - say on a credit card- so you can spend $110,000 dollars even though you only earn $100,000 dollars.
Since your spending is another person's income,someone is earning $110,000 dollars.
The person earning $110,000 dollars with no debt can borrow $11,000 dollars,so he can spend $121,000 dollars even though he has only earned $110,000 dollars.
His spending is another person's income and by following the transactions we can begin to see how this process works in a self-reinforcing pattern.
But remember, borrowing creates cycles and if the cycle goes up, it eventually needs to come down.
THAT LEADS US INTO SHORT TERM DEBT CYCLE!
As economic activity increases,we see an expansion-first phase of the short term cycles.
Spending continues to increase and prices start to rise.
This happens because the increase in spending is fueled by credit
- which can be created instantly out of thin air.
When the amount of spending and incomes grow faster than the production of goods-prices rise!
When prices rise, we call this INFLATION!
The Central Bank doesn't want too much inflation
because it causes problems,seeing prices rise, it raises interest rates.
With higher interest rates, fewer people can afford to borrow money.
And the cost of existing debts rises.
Think about this as the monthly payments
on your credit card going up.
Because people borrow less and have higher debt repayments,
they have less money leftover to spend, so spending slows
...and since one person's spending is another person's income,incomes drop...and so on and so forth.
When people spend less, prices go down.
We call this DEFLATION.
(Now you know what is the inflation and deflation!
Bear that on you mind,that is very important)
Economic activity decreases and we have a recession.
If the recession becomes too and inflation is no longer a problem,the central bank will lower interest rates to cause everything to pick up again.
With low interest rates,debt repayments are reduced and borrowing and spending pick up and we see another expansion.
(LIKE A MACHINE RIGHT)
In the short term debt cycle,
spending is constrained only by the willingness of lenders and borrowers to provide and receive credit.
When credit is easily available,there's an economic expansion.
When credit isn't easily available,there's a recession.
And note that this cycle is controlled primarily by the central bank.
The short term debt cycle typically lasts 5 - 8 years and happens over and over again for decades.
But notice that the bottom and top of each cycle finish
with more growth than the previous cycle and with more debt.
Why?
Because people push it — they have an inclination to borrow
and spend more instead of paying back debt.
IT'S A HUMAN NATURE!
Because of this,over long periods of time,debts rise faster than incomes creating the Long Term Debt Cycle.
Despite people becoming more indebted,lenders even more freely extend credit.
Why?
Because everybody thinks things are going great!
People are just focusing on what's been happening lately.
And what has been happening lately?
Incomes have been rising!
Asset values are going up!
The stock market roars!
It's a boom!
It pays to buy goods, services, and financial assets
with borrowed money!
When people do a lot of that, we call it a bubble.
So even though debts have been growing,incomes have been growing nearly as fast to offset them.
Let's call the ratio of debt-to-income the debt burden.
So long as incomes continue to rise,the debt burden stays manageable.
At the same time asset values soar.
People borrow huge amounts of money to buy assets as investments
causing their prices to rise even higher.
People feel wealthy.
So even with the accumulation of lots of debt,rising incomes and asset values help borrowers remain creditworthy for a long time.
But this obviously can not continue forever.
And it doesn't.
Over decades, debt burdens slowly increase creating larger and larger debt repayments.
At some point, debt repayments start growing faster than incomes
forcing people to cut back on their spending.
And since one person's spending is another person's income,
incomes begin to go DOWN!
Whick makes people less creditworthy causing borrowing to go down.
Debt repayments continue to rise which makes spending drop even further and the cycle reverses itself.
This is the LONG TERM DEBT PEAK!


Debt burdens have simply become too big.
*For the United States, Europe and much of the rest of the world
happened in 2008.
*It happened for the same reason it happened in Japan in 1989
and in the United States back in 1929.
Now the economy begins Deleveraging.
In a deleveraging; people cut spending,incomes fall, credit disappears,assets prices drop, banks get squeezed,the stock market crashes, social tensions rise and the whole thing starts to feed on itself the other way.
As incomes fall and debt repayments rise,borrowers get squeezed.
No longer creditworthy,credit dries up and borrowers can no longer borrow enough money to make their debt repayments.
Scrambling to fill this hole, borrowers are forced to sell assets.
The rush to sell assets floods the market
This is when the stock market collapses,the real estate market tanks and banks get into trouble.
As asset prices drop, the value of the collateral borrowers can put up drops.
This makes borrowers even less creditworthy.
People feel POOR.
Credit rapidly disappears.
Less spending ›less income ›
less wealth ›less credit ›
less borrowing and so on.
It's a VICIOUS CYCLE
This appears similar to a recession but the difference here
is that interest rates can't be lowered to save the day.
In a recession, lowering interest rates works to stimulate the borrowing.
However, in a deleveraging, lowering interest rates doesn't work because interest rates are already low and soon hit 0% - so the stimulation ends.
*Interest rates in the United States hit 0% during the deleveraging of the 1930s and again in 2008.
The difference between a recession and a deleveraging is that in a deleveraging borrowers' debt burdens have simply gotten too big
and can't be relieved by lowering interest rates.
Lenders realize that debts have become too large to ever be fully paid back.
Borrowers have lost their ability to repay and their collateral has lost value.
They feel crippled by the debt - they don't even want more!
Lenders stop lending.
Borrowers stop borrowing.
Think of the economy as being not-creditworthy,just like an individual.
So what do you do about a deleveraging?
The problem is debt burdens are too high and they must come down.
There are four ways this can happen.
1. people, businesses, and governments cut their spending.
2. debts are reduced through defaults and restructurings.
3. wealth is redistributed from the 'haves' to the 'have nots'.
and finally, 4. the central bank prints new money.

These 4 ways have happened in every deleveraging in modern history.
Usually, spending is cut first.
As we just saw, people, businesses, banks and even governments tighten their belts and
cut their spending so that they can pay down their debt.
This is often referred to as austerity.
When borrowers stop taking on new debts,and start paying down old debts, you might expect the debt burden to decrease.
But the opposite happens!
Because spending is cut - and one man's spending is another man's income - it causes incomes to fall.
They fall faster than debts are repaid and the debt burden actually gets worse.
As we've seen,this cut in spending is deflationary and painful.
Businesses are forced to cut costs...which means less jobs and higher unemployment.
This leads to the next step: debts must be reduced!
Many borrowers find themselves unable to repay their loans — and a borrower's debts are a lender's assets.

When borrowers don't repay the bank,
people get nervous that the bank won't be able to repay them so they rush to withdraw their money from the bank.
Banks get squeezed and people,businesses and banks DEFAULT on their debts.
This severe economic contraction is a DEPRESSION.
A big part of a depression is people discovering much of what they thought was their wealth isn't really there!!
Let's go back to the bar.
When you bought a drink and put it on a bar tab,you promised to repay the bartender.
Your promise became an asset of the bartender.
But if you break your promise - if you don't pay him back and essentially default on your bar tab -then the 'asset' he has isn't really worth anything.
It has basically disappeared.
Many lenders don't want their assets to disappear and agree to debt restructuring.
Debt restructuring means lenders get paid back less or get paid back over a longer time frame or at a lower interest rate that was first agreed.
Somehow a contract is broken in a way that reduces debt.
Lenders would rather have a little of something than all of nothing.
Even though debt disappears, debt restructuring causes
income and asset values to disappear faster,so the debt burden continues to gets worse.
Like cutting spending, debt reduction is also painful and deflationary.
All of this impacts the central government because lower incomes and less employment means the government collects fewer TAXES!
At the same time it needs to increase its spending because unemployment has risen.
Many of the unemployed have inadequate savings and need financial support from the government.
Additionally, governments create STIMULUS PLAN and increase their spending to make up for the decrease in the economy.
Governments' budget deficits explode in a deleveraging because they spend more than they earn in taxes.
This is what is happening when you hear about the budget deficit on the news!
To fund their deficits, governments need to either raise taxes or borrow money.
But with incomes falling and so many unemployed,who is the money going to come from?
The rich.
Since governments need more money and since wealth is heavily concentrated in the hands of a small percentage of the people,
governments naturally raise taxes on the wealthy which facilitates a redistribution of wealth in the economy - from the 'haves' to the 'have nots'.
The 'have-nots,' who are suffering, begin to resent the wealthy 'haves.'
The wealthy 'haves,' being squeezed by the weak economy, falling asset prices,higher taxes, begin to resent the 'have nots.'
If the depression continues social disorder can break out.
Not only do tensions rise within countries,they can rise between countries - especially debtor and creditor countries.
This situation can lead to political change that can sometimes be extreme.
*In the 1930s, this led to Hitler coming to power,war in Europe, and depression in the United States. Pressure to do something
to end the depression increases.
Remember, most of what people thought was money was actually credit.
So, when credit disappears, people don't have enough money.
People are desperate for money and you remember who can print money?
THE CENTRAL BANK CAN!
Having already lowered its interest rates to nearly 0- it's forced to print money. Unlike cutting spending,debt reduction, and wealth redistribution,printing money is inflationary and stimulative.
Inevitably, the central bank prints new money —OUT OF THIN AIR — and uses it to buy financial assets and government bonds. It happened in the United States during the Great Depression
and again in 2008, when the United States' central bank —
the Federal Reserve — printed over two trillion dollars.

Other central banks around the world that could,
printed a lot of money, too.
By buying financial assets with this money,it helps drive up asset prices which makes people more creditworthy.
However, this only helps those who own financial assets.
You see, the central bank can print money but it can only buy financial assets.
The Central Government, on the other hand,can buy goods and services and put money in the hands of the people
but it can't print money. So, in order to stimulate the economy, the two MUST COOPERATE!!
BY BUYING GOVERNMENT BONDS,THE CENTRAL BANK ESSENTIALLY LENDS MONEY TO GOVERNMENT,ALLOWING IT TO RUN A DEFICIT AND INCREASE SPENDING ON GOOD AND SERVICES THROUGH ITS STIMULUS PROGRAMS AND UNEMPLOYMENT BENEFITS!This increases people's income
as well as the government's debt. However,it will lower the economy's total debt burden.
This is a very risky time. Policy makers need to balance the four ways that debt burdens come down.
The deflationary ways need to balance with the inflationary ways in order to maintain stability.
If balanced correctly, there can be a
Beautiful Deleveraging.
You see, a deleveraging can be ugly or it can be beautiful.
How can a deleveraging be beautiful?
Even though a deleveraging is a difficult situation,
handling a difficult situation in the best possible way is beautiful.
A lot more beautiful than the debt-fueled, unbalanced excesses of the leveraging phase.
In a beautiful deleveraging,debts decline relative to income, real economic growth is positive,and inflation isn't a problem.
It is achieved by having the right balance.
The right balance requires a certain mix of cutting spending, reducing debt, transferring wealth and printing money so that economic and social stability can be maintained.
People ask if printing money will raise inflation.
It won't if it offsets falling credit.
Remember, SPENDING IS WHAT MATTERS!
A dollar of spending paid for with money has the same effect on price as a dollar of spending paid for with credit.

By printing money, the Central Bank can make up for the disappearance of credit with an increase in the amount of money.
In order to turn things around, the Central Bank needs to not only pump up INCOME GROWTH but get the rate of income growth higher than the rate of interest on the accumulated debt.
So, what do I mean by that? Basically,income needs to grow faster than debt grows.
For example:
let's assume that a country going through a deleveraging has a debt-to-income ratio of 100%.
That means that the amount of debt it has is the same as the amount of income the entire country makes in a year.
Now think about the interest rate on that debt,let's say it is 2%.
If debt is growing at 2% because of that interest rate and income
is only growing at around only 1%, you will never reduce the debt burden.
You need to print enough money to get the rate of income growth above the rate of interest.
However, printing money can easily be abused because it's so easy to do and people prefer it to the alternatives.
The key is to avoid printing too much money and causing unacceptably high inflation, the way Germany did during its
deleveraging in the 1920's.
IF POLICYMAKERS ACHIEVE THE RIGHT BALANCE,A DELEVERAGING ISN'T SO DRAMATIC!
Growth is slow but debt burdens go down.
That's a beautiful deleveraging.
When incomes begin to rise, borrowers begin to appear more creditworthy.
And when borrowers appear more creditworthy,lenders begin to lend money again.
Debt burdens finally begin to fall.
Able to borrow money, people can spend more. Eventually, the economy begins to grow again,leading to the reflation phase of the long term debt cycle.
Though the deleveraging process can be horrible if handled badly,
if handled well, it will eventually fix the problem.
It takes roughly a decade or more for debt burdens to fall and economic activity to get back to normal - hence the term 'lost decade.'
Of course, the economy is a little more complicated than this template suggests.
However, laying the short term debt cycle on top of the long term debt cycle and then laying both of them on top of the productivity growth line gives a reasonably good template for seeing where we've been,where we are now and where we are probably headed.
So in summary, there are three rules of thumb that I'd like you to take away from this:
First:
Don't have debt rise faster than income,because your debt burdens will eventually crush you.
Second:
Don't have income rise faster than productivity,because you will eventually become uncompetitive.
And third:
Do all that you can to raise your productivity,because, in the long run, that's what matters most.

That's all for now.
It will be good if you read whole this article and think for a little while about that.
I will not put a pressure on you to read.
Step by step
This is very important later I will want to get you into actual economy actions and all new fiscal and monetary policy.
I'm sorry I can not write a short history about economy at this moment.
It will be more funny to analyse and look at history.
And see how's things develope,BUT MAYBE ONE DAY!
This is the starting point,hope you enjoyed and learn something.

Start with testing strategy yesterday.
There is some problem with Trade Explorer it refuse to connect.
Anyway I HIT FIRST TAKE PROFIT AND I'M PROUD ON MY BABY - NEW STRATEGY!




Another good trade
( I closed it before it hit TP) (150 pips-that's way enough)



I will upload here all ,because trade explorer don't works (as I mention).

It is always exciting when you make something and that works.
I think that is the best feeling.

but I will not rush.
Let's wait first month to pass and after that we can deal with it.
Until then,just chart updates (unfortunately).


Update : Another hit !



Update: Re-entry usd/cad +175


ALL four positions closed with big profit.
2 positions still opened.

Beautiful chart,in my opinion "chart of the week"

I want to do one little experiment on AUD/USD.
I hope it will continue to fall or make some range till tonight.
We will see.
Later I will explain what is all about.
It's too early now,because I will need to wait for AUD (un)employment rates.
Later

Stay tuned !
You will learn probably a very important lesson.

Interesting,potential triple top pattern on USd/CAD

After 4 TP,first first SL.
Not bad.



Update:

Usd/JPY -second SL





4tp's / 2 sl's

I forgot to do my experiment last night.
HUHHHH,sorry folks.

I'm doing a lot of things and thoughts simply drifts away.

I wanted to do one experiment with news.
We couldn't know that data before they released.
But I wanted to see could market tell us earlier about possible impact.

and yes,
USD/CAD made tripple top pattern

Ok.let's back to my fundamental GROUND!

Today we have retail sales for February and also Draghi speech.

I do not expect to see any new from Draghi since last speech.
But Retail Sales would be interesting to see.
For many reason.
One is famous "weather conditions" , another is weak USD this morning (gmt) that could indicate strong usd later.

DAMN EUR/USD haah starts to looks like a s&p 500 and others indices..Hit new highs and highs hahah LOL

Attached Image (click to enlarge)

Wal-Mart said on Tuesday that U.S. sales have improved since mid-February after cold and snowy weather dented business in the first half of that month.
The world's largest retailer has had "very good sales" in recent weeks, Chief Financial Officer Charles Holley said at an investor conference in New York that was also webcast.
—Reuters

What to say,rumors or not we will see ..

I see here possible H&S,interesting.



The DEAL was better on M5 tf.

FINALLY I SET UP TRADE EXPLORER

It refuse too connect because of problem with my last explorer.
Anyway...

Well,retail sales was good and more imporatant jobless claims!
March numbers will be more important.
Import/Export prices may put some pressure on inflation.
Inflation is sensitive area.
Yellen was confident about inflation.