I have long stated the eurozone will breakup. Historically speaking, no currency union has ever survived in the absence of a political union.
History has shown faster economic growth has been accompanied by higher domestic investment. The end result is higher productivity, higher living standards and of course higher revenue for the US government and states. Between the early 60’s and the present, the spread between net business fixed investment and mandatory entitlement spending has never been wider, I.E., entitlement spending increasing and business investment shrinking.
Three weeks ago the Wall Street Journal published my OpEd piece about concern that China may try to make the rebalancing process less painful by allowing the RMB to depreciate. In the piece I argue that this isn’t as obvious as you might think.
The market was overbought on September 14th after two weeks of shock and awe from the ECB and the Fed. The logical conclusion after that move was a correction, especially with the void of major catalysts. The more important question isn’t why the market is correcting, but where will it find support?
Central bankers around the world may be providing a backstop to the financial markets in much the same way Greenspan did during the “Goldilocks” years, but when the short-term euphoria wears off, will the negative repercussions be even more severe?
The velocity of money buried in a hole is zero. The velocity of hoarded money is also zero. The velocity of credit that is never used (i.e. no money is actually borrowed and spent) is also zero. Money that is created but which has zero velocity cannot spark inflation.
The idea that China was going to rule the world by the end of the decade was complete silliness. Exponential math, as well as energy constraints said it would not happen. Malinvestments and fraud were simply icing on the absurdly-bullish cake.
Peter Schweizer is probably one of the few Americans who truly understands how deep the cronyism runs in our political system, and he's revealed a lot about that and what he thinks mainstream citizens can do to start counteracting it in his book Throw Them All Out.
Stocks here gained about 0.5% in the first couple of hours despite a preannouncement from Caterpillar, which has been impacted by cutbacks in spending, most specifically in the base metals, as a consequence of economic weakness in China and the world over.
Correlation is not causation, as we all know. That brings us to the Fed, where many market observers are seeing causation when there might be other reasons for stock market movements. What if the victory lap Bernanke has taken due to stock market results is perhaps a little too early or out of place entirely?