We don’t need to economically define what that means: given the precarious state of the Eurozone, or Japan, or the bubble characteristics of U.S. stocks or Chinese or Canadian real estate, even a hiccup in interest rates could lead to economic pneumonia.
By immediately embracing a Kiev regime whose legitimacy is suspect, the European Union (aggressively pushed by Washington) is engaging in an adventure that will prove extremely costly, both in terms of money and credibility.
Our views vary considerably from the sentiment of most investors. We are less concerned with a dramatic change in central bank policy, but see anemic economic growth and overly stretched stock valuations as a key challenge.
In the U.S., the rapidly building currency crisis in the emerging markets is hardly noticed.
The past few weeks have blown a few holes into such thinking. Bond yields have risen sharply, major stock indices have been under growing pressure and gold has rallied against all currencies.
Markets are so enamored by the prospect of continued and escalating stimulus that they forget the desperate economic circumstances that make bailouts, stability funds and other support operations necessary.
Last year, as the EU’s political elite dithered over rescue packages of thirty and forty billion Euros, we wrote that a mere stabilization of the Euro–crisis would require at least 2.5 to 3.5 trillion.
In the U.S., massive stimulus has fed through to employment creation, allowing the economy to gradually recover.
Since 2008, numerous stimulus packages and QE1 and QE2 have seriously undermined the integrity of the dollar. In the past few weeks, both the Swiss National Bank and the Bank of England have introduced their own versions of quantitative easing, and now the EU is going down much the same path.
In Europe, there recently were comprehensive attempts at stabilization, but the huge structural uncertainties that have beset the EU for some time were left unaddressed.
And as to central banks, we believe they are far more likely to add to gold reserves than dispose of them.
Governments have created money on such a scale that the currencies of most major economies are inherently untrustworthy. Moreover, governments from the U.S. to Europe to Japan have vowed to fight further threats to their economies with quantitative easing, i.e the creation… Read More »Currencies of most Major Economies