t. man hatter
Anyone who doesn't see through the glass darkly needs to look several more times.
Concern about deflation--especially in the European Union--has created hoards of easy money. Borrowing costs in Italy and Spain on 10-year debt are below their pre-crisis levels.
Despite a host of geopolitical nonsense around the globe, investors continue to pile into these riskier peripheral assets. There was even a mild MSM led celebration about Spain's economic recovery being underway. Now, however, that looks like just so much wishful thinking.
Here's a quote from http://globaleconomicanalysis.blogspot.com/2014/08/recovery-mirage-in-spain-dissipates.html that tells the real story about that fake recovery.
Spain has been living on borrowed time for years, accumulating a huge debt to maintain their level of consumption and investment-their standards of living. Between 2002 and 2007, Spain was amassing a growing external deficit, as more and sell less abroad (exports) and bought more (imports), bringing its foreign debt grew.
This imbalance is reflected in a very specific indicator, the current account deficit, which in 2007 reached a record high close to 10% of GDP. That is, the entire country that year said external financing close to 100 billion euros to cover their consumption and investment.
The fact that the trade deficit has risen
again after the minimum economic rebound in recent quarters is a sign of
weakness, because it demonstrates the strong dependence Spain still
external financing to maintain their level of consumption and
investment.
Don't be disturbed by the broken English. As the article, if you care to read it, points out this is a translation from Spanish to English.
Some of this celebration centered on a sick sort of pride like my kid is the smartest kid in the dumbest row of his class at school. Think U.S.economy here versus the rest of the world. Two-year U.S. Treasuries yield 40 basis points.
If that's investors' idea of a flight to safety, as a colleague recently put it, it's more like bond bungee jumping. Troubles don't happen often but when they do.....
Later this week those central bank oracles, Mario Draghi and Janet Yellen at Jackson Hole, will ease most of our concerns by pretending that they know what's going on and have their macro and micro thumbs firmly plastered on their economic Ouija boards.
Both these bureaucrats want one thing: investors to continue ramping up their appetite for risk and yield. It's a sort of please-take-more-risk kicking-the-can pandering of the worse sort.
Perhaps the ugliest nightmare of bureaucrats like Draghi and Yellen is people who are starting to get it, the last people these quasi- politicians want to ever get it, everyday, middle class people.
Here's a quote from letters to the editor in today's Wall Street Journal. It's a bad news, good news quote.
Europe's economic malaise and youth underemployment are caused by a much bigger force here than the cost of labor protections ("Young, European and Broke," page one, Aug. 9). The real driver is Europe's ever-expanding social welfare state and the increasing tax load it demands from the populace. Europeans have finally burdened themselves sufficiently to depress investment and innovation so much that maintaining economic stability is all but impossible and expansion is just about out of the question.
As
of late, America too has embraced this notion and followed Europe's
lead. Well, it isn't all bad. At least they are illuminating the road
ahead for us so we know where we're going.
Ken Ratkovich
And keep reading. And by all means don't let the MSM apologists disparage you from owning hard assets like gold.
No comments:
Post a Comment