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Week In Review


The Turkish lira’s decline accelerated after the Trump administration imposed tariffs and sanctions on Turkey over Turkey’s refusal to release a detained American citizen.  President Erdogan was defiant in a Friday speech and stated that Turkey was the target of an economic attack.  Trump doubled the tariffs on Turkish steel exports and sought further sanctions.  Global markets were down over concern about Turkey and other emerging markets, which are also seeing currency declines

Our Take

Turkey is significant to global financial markets due to Turkish firms’ significant non-lira debts to Italian and Spanish banks, which cannot afford to take large losses on these debts.  This episode in Turkey illustrates how the large increase in debt and the distortions to capital flows caused by government and central bank actions since the financial crisis have ultimately made the global economy and financial system less stable and more susceptible to events that overwhelm authorities’ attempts to contain them.


Producer prices were unchanged in July, while the core PPI, which excludes food and energy, rose 0.1%.  Producer prices have risen 3.3% over the past year.  July headline and core consumer prices rose 0.2% and are up 2.9% year-over-year.

Our Take

Producer prices rose slightly less than expected, while consumer price changes rose as anticipated.  Nothing in the inflation reports should alter the Fed’s current thoughts on tightening.


The Trump administration announced that the previously proposed tariffs on $16 billion of imports from China will go into effect on August 23.  The Chinese government immediately announced retaliatory tariffs on a comparable amount of imports from the U.S.

Our Take

The U.S.-China trade war continues to escalate, and further actions are expected in the coming weeks.


Puerto Rico reached two debt restructuring agreements with creditors this week.  One of this week’s agreements would reduce the commonwealth’s sales tax debt.  This follows last week’s preliminary restructuring agreement with the Puerto Rico Electric Power Authority.  Both agreements require final approval from bondholders.  In addition, Puerto Rico’s Governor Ricardo Rossello released a report to Congress this week, which states that the recovery from last year’s hurricanes will cost $139 billion.

Our Take

Puerto Rico is taking steps toward economic recovery from the recession and last year’s hurricanes.  Even if this week’s debt restructuring agreements are approved, the commonwealth has a long road ahead to reach financial stability.  Puerto Rico continues to struggle with high debt, a shrinking population, and damaged infrastructure.

All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.  Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice.