MONDAY OUTLOOK: six insoluble problems and a gold rush

 Globalist mercantilism, the eurozone, China, Japan, neoliberal ideas & monetarist failure could soon set off the gold boom of all time

There will always be problems with a globalised mercantile economic model, because the deadly combo of knock on effect plus differing local developments – social and political as well as economic – will be ever present. Until, that is, there is one world ‘company’ selling everything to everyone everywhere, and distributing it through one retailer.

The whole idea was silly one second after Ted Levitt had it, and the last ‘outcome’ above is cloud cuckoo land. But don’t assume it isn’t the goal for some nutters out there….most of whom work in the US State Department or on Wall Street.

Meanwhile, after forty years of growth in the acceptance of both globalist and neoliberal economics as a pair of TINA twins (There Is No Alternative) it would be impossible to overestimate the mess we’re in….by ‘we’ I mean Homo ‘sapiens’, but few nations have a worse outlook over the medium term than Britain.

I’m going to list the current concerns as we start another week – a week which, I am fairly certain, will not show obvious signs of collapse – although Correction 4 is already under way, it’s just that hardly anyone has noticed. There is a dual problem wrapped inside every concern: not just that it exists, but that all the Generals involved are in 2016, and playing to the rules that existed before the 1990s made globalism truly global.

One can’t avoid starting with the eurozone: one failed State, three more teetering on the brink, and a fifth (France) where every market sector from top to bottom is now in a deep depression. On top of that, we can see signs that Italian, Greek and Austrian banks remain very far from safe, having put up billions of euros in guarantees when times were good, but now lacking the one element they really need to solve the problem: money.

Into this complex mélange of currency, economic, fiscal and financial poo the ECB’s Signor Draghi proposes to give us more of the NIRP that has failed so spectacularly in Japan. I have no idea at all why anyone has any faith in this idea, which seems to be that of using an old fashioned narrow-spectrum antibiotic to cure a patient suffering from ebola complicated by tertiary AIDS and a nasty bout of self-administered pneumonia.

The markets are behaving as they are at the moment because a large number of real players (as opposed to Old Boys who need to keep lying) have come to a near certainty that the monetarists simply don’t have the anwer….The jury is out, but only one or two members are still dithering on their verdict.

Thus, we’re starting to see a growing spread in the yields on offer from Spanish bonds and German bunds; and Italian bank share prices remain in the doldrums. With a multivariate problem to solve and growing loss of faith/face, the next round of ECB stimulation will, I am sure, get nowhere.

[I can’t resist observing at this point that the EC’s eurogroupe pillocks dropped all pretence of respecting democracy by plotting to grant visa-free travel to 45 million Ukrainians…..in direct defiance of the Dutch referendum result. That little bit of daft spite had Drizzleboom and the Ball of Wheelchair Bile written all over it. But still the Brits are split down the middle on Brexit]

In China, while the Shanghai index has been very ‘stable’ for some weeks now, senior economic commentators like Ambrose Evans-Pritchard and Geoffrey Yu agree with me that the cost of just buying stability isn’t sustainable.

China has joined the Club suffering from what I first called ‘Indeflation’ about five years ago – deflation in some areas, but inflation in others. Its Yuan is overpriced, and this is not helping the global problem of falling demand…so prices of cheap/industrial goods will fall. Food, on the other hand, is getting a lot more expensive very quickly. Both AEP and Yu now think a Chinese devaluation via a free-floating Yuan is inevitable. I agree, but it won’t tackle the root cause of the Earth’s problem – consumers too nervous and stretched to consume. That problem will be systemic as long as neoliberal ideas about wealth egality continue to hold a small section of every population in thrall.

The effect that devaluation is going to have on Japanese exports in general and the already strengthening Yen in particular does not bear thinking about. The best thing Abe could do for Japan right now is what the American Abe did in 1865 – go and watch a play with zero security in place. Abenomics (never anything more than the last vomit of sick monetarist theory) has, as many of us predicted, been a catastrophe.

At last, I have come down firmly on the option of gold buying, but this carries the triple risks of a limited window available, further mad attempts at price destruction at some point by the Central Banks, and/or being lumbered with a commodity, private trade in which has been declared illegal.

However, I now think it’s a risk worth taking. And the usual caveat applies: that’s what I’m planning to do: what you decide is your own affair – I’m not qualified to offer advice.

12 thoughts on “MONDAY OUTLOOK: six insoluble problems and a gold rush

  1. Glad to see you’ve joined the club you old bugger! I’m presently in Hong Kong and picking up a few more Britannias, which are capital gains tax free, at attractive prices.

    Like

  2. Into this complex mélange of currency, economic, fiscal and financial poo the ECB’s Signor Draghi proposes to give us more of the NIRP that has failed so spectacularly in Japan. I have no idea at all why anyone has any faith in this idea, which seems to be that of using an old fashioned narrow-spectrum antibiotic to cure a patient suffering from ebola complicated by tertiary AIDS and a nasty bout of self-administered pneumonia.

    Here John i have to disagree it far to modern far to complicated for these morons,am afraid it more akin to the quacks administering Arsenic to there patients!

    Liked by 1 person

  3. Visa-free travel to Ukranians, is bizarre.
    Right up there with Turkey / NATO.

    Deliberate destabilization to confuzzle, in the face of inevitable coming chaos.

    Liked by 2 people

  4. Those thinking of buying some Au may find bitgold of interest.
    They will securely store it for you and give you a debit card that you can use for withdrawals in a choice of currencies at the prevailing price. They charge 1% on transactions.

    Like

  5. Keynes rules JW … one they love and abuse, the other they chose to ignore and possibly the more important.

    1.) Only ever have to pay the interest on the debt so you can borrow under this premise.
    2.) When the level of malinvestment exceeds good you end up with the zombie economy.

    Ignore 1.) that is just a central banker snakeskin oil salesman trick,

    The 2.) is now in effect, any attempt to raise rates contracts the malinvestment that is now the larger share of the ecnomy so you have the mother of all recessions because malinvestment starts to disappear fast. Alternatively destroying the economy by injecting more liquidity into the economy just grows the malinvestment but it is a diminishing return on what you put in.

    Leads to the zombie economy and starts to expain all the governments missed targets on debt / deficit etc. because we crossed the threshhold in 2.). Central bankers needed to understand their specialist subject more, they can only reset the economy now, start again paying a more watchful eye on 2.) but then you can use 1.) again.

    Like

  6. Oh well I may not be a player in the markets – too dam poor – but at least I have the consolation of home made steak pie, mash and gravy for dinner.

    Liked by 1 person

  7. Insulting Erdogan of Turkey is a crime IN Germany…. IF Mr Erdogan objects and he did. Ha Ha what a joke Add this to your Brexit count. Can French law land you in the slammer if you insult his Islamic Majesty?

    Like

  8. Don`t forget JW, helicopter money will be introduced to delay the inevitable. Heck, they may be able to delay the inevitable for another decade or so as it appears that all the major economies are in similar states so there is no clear difference or safe haven. Hugh Hendry`s experience is salutary. His capitulation came with the realisation that there are no sensible rule books any more. Everything we have learned about rational investing no longer exists as a the insane now have the keys. As they say, “Trade accordingly”.

    Like

  9. It might be wise to purchase some percent of your AU in jewelry as it may still be marketable if the governments ban the sale of gold bars, etc.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s