The world's economy is deeply into the danger zone, the IMF has said:
BBC Article• Germany is forecast to grow 0.3% in 2012, down from 1.3% originally predicted in September.
• France is expected to show 0.2% growth in 2012, down from 1.4%.
• US, based on recent strong domestic data on jobs and manufacturing: 1.8%.
"Emerging markets, such as central and eastern Europe and Asia, could also be hit by the eurozone crisis... while these markets have been quite resilient to shocks and developments in major economies in the past year, recent indicators have weakened significantly and the general business climate has deteriorated."
"On Monday, IMF chief Christine Lagarde warned the global economy could fall into an economic spiral reminiscent of the 1930s unless action was taken on the eurozone crisis."
Speaking of problems in Emerging Markets:
Globe & Mail: Brazil inflation picks up, may overshadow stimulus
Comments
I concur and think the very best we can hope for is a lost decade - The Great Austerity - but the entire developed world this time, not just Japan. And I say best because one alternative is outright financial collapse leading to civil unrest and whatnot.
They've got a decent plan, considering the situation, but who knows if it will work.
Let's see - over $100 T in Unfunded Liabilities on the Federal level in this country (as bad if not worse in Euroland) and no politically viable way to reduce or default sufficiently AND no politically viable way to raise taxes suffiently to pay this tab.
Their plan is to do both as much as politically possible AND hopefully monetize the remainder. I've read estimates that this monetization will result in the halving of the value of the dollar over the next ten years.
Oh, and this is the same dollar that has lost 96% of its value since the Federal Reserve was created in 1913.
Will they succeed? WTF do I know? I hope - tengo dos nietos.
peace,
rono
Take care-
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/1/23_Eveillard_-_We_are_Headed_for_Enormous_Inflation_&_Higher_Gold.html
About the only common ground here is that neither of them are too hopeful about anything good happening soon.
Alas, parts and pieces of some things don't seem to change very fast; and are sometimes only relative from one's experiences and continued gained knowledge.
Hmmmm... what action is probably going to be taken?
Lyrics:
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And I thought we just got done with that 1930s flashback. I guess making those kind of statements is the only way to spur any real corrective actions.
The US had/has major economic problems. Congress/Executive takes certain actions. A whole lot of us think this was the wrong thing to do- better to keep hands off and let nature take it's course. "It will be painful, but let's get it over with instead of postponing it."
The EU had/has major major economic problems. Politicians/Leaders take no action (well, not much, anyway). A whole lot of us think this is wrong thing to do- better to keep hands on and don't let nature take it's course. "It will be painful, but let's postpone it instead of getting it over with."
WTF. Almost enough to make you sympathize with Politicians/Leaders.
NOTE: This is further addended, as others have placed similar replies since I began this.
This is not directed at you; but at the excellent points you placed, noted next.
Interesting to observe the irrationality of we humans. Leaving all accusations of cause aside-
The US had/has major economic problems. Congress/Executive takes certain actions. A whole lot of us think this was the wrong thing to do- better to keep hands off and let nature take it's course. "It will be painful, but let's get it over with instead of postponing it."
The EU had/has major major economic problems. Politicians/Leaders take no action (well, not much, anyway). A whole lot of us think this is wrong thing to do- better to keep hands on and don't let nature take it's course. "It will be painful, but let's postpone it instead of getting it over with."
Two major situations exist that are different, intertwined with similarities; even though the U.S. and Europe are not similar.
PO'd factor, my personal side:
After a fun evening of Trick or Treat on Oct. 31, 2007 I started a most through review of our portfolio and the markets in general. After major whipsaws for 8 months, as I have noted before; we sold 86% of our equity holdings in June, 2008. We watched as the market continued to swing and even improve for a few months. This caused a fair amount of the "did we do the right thing???" As things turned, we did do the right thing at the right time.
The PO'd factor is that the magical and wonderful folks at the Fed with all of that human brain power and computers loaded with every possible type of program..........they, in my opinion; missed catching the falling ball. They knew the game was in play, theoretically heard the ball being hit.........I suppose sight of the ball was missed from the sunshine or bright night lights. I will not know before my passing as to what extent the Fed or Treasury knew about all of the crap holdings of the investment banks and how one house of cards was placed upon another. The best I may presume is that many in these groups were/are aware and hoped for the best and that there would not be an unwind. A small part of the being of the unwind with Lehman in 2008 has roots in 1998, to the best of my understanding. A similar meeting took place in 1998 regarding the failure of Long Term Capital Partners; as the meeting in 2008 with the big banks. In 1998, LTCP was crashing; I don't recall the specifics, but other bankers were forced (the Fed) to lay out about $300 million each (they were repaid with a small profit) to effectively buy the junk from LTCP. Except for one invited player, who refused to offer any money.............yup, Lehman. So, Lehman was already on the poop list in 2008, being only 10 years later.
My summary is not that I think the bailouts should not have happened; but being late to the game by the Fed/Treasury. I do firmly still feel that the financial tools that were and are still being used should only be in place for whomever chooses to use them; but it is their capital at risk; and not the money of the citizens. Mr. Clinton, although a most brillant thinker; should have never signed the 1992 legislation (Glass-Steagall) that allowed the investment banks to play with the monies of this country being co-mingled with traditional banking. This is a most crucial example of the perverted and corrupt power that exists just down the road from the halls of justice, in D.C.
I don't know that I will be able to write a view as to the U.S. and Europe, and the similar/disimiliar; that is understandable.
"hank" already voiced upon this. I will add that the behavior of nations is set into and from their past experiences; with some of the overhanging behaviors rooted from many years ago. Although many things have changed, our country still has cultural differences that have been handed down in thinkng and actions since the end of the Civil War, some 147 years ago. These "feelings" still affect what is taking place in Europe today. In the time frame of life and history, it has not been that long since the end of WWII in Europe. Those who suffered, and then pulled themselves into a new, post war world have passed along the stories and experiences that are part of the thinking of European leaders today.
These leaders today find great conflict of their own countries interests in what is being asked of them to sacrifice "for the greater" good". Side note: a familiar song today in this country. In my opinion, it is not difficult to understand the feelings of a German government or citizen; as to "giving away the farm" to those countries that did not choose to live within their means.
As "hank" noted, the U.S. form of a central bank vs Europe is much different. The soverign countries of the EZ stand out from one another is plain and clear form; and Germany keeps asking why it should "dumb down" its standards to support the laggards.
This has happened here, but in a subtle form. North Dakota has a stellar record of being responsible in its monetary operations. Yet, in the under belly of all things monetary, the strong monetary states; are indeed helping to support the weaker states in this country. It is that not all of this is recognized on the surface. The destruction comes in the many forms that have been discussed here. The current affairs of monetary policy, perverted and low interest rates and the machinations that come from D.C. and are federal law in nature do indeed affect those in North Dakota, who were minding their own business and doing a fine job of that; but get dragged down by the laggard states.
Well, I don't know. I am not going to review this for any corrections, missing thoughts or otherwise. Perhaps I should just place the write into the electronic trash can. I am not yet on coffee cup number two.
Basic summary: The Fed/Treasury missed the call, in my opinion. I am not sure they know what to do now; as the game moves along and they have a lot of points to score before the ninth inning, if they hope to win the game. The fans in the stands keep scratching their heads as to how the game is being played. I am sure that an individual investor is on the outside looking in; but never will be invited to a meeting with those who move among the inner circles of power, both political and monetary. Are their conspiracies? At the very least, one must presume that those in high power and monetary positions do battle among themselves; for the sake of ego, if nothing else. If some money may be made, so much the better; damn the rest. Human nature and history must suggest that for all of the powerful who have been and today are benevolent; there exists those completely on the other end of the spectrum of human behavior. At any given moment in time; the investing world is at battle. We do not see the war games of money in place; but later we do notice "monetary ambulances" carrying away the wounded portfolios; and we then wonder, where did that come from? Sadly, the many powerful circles of clubs related to all things monetary have profound affects upon all of us. Call them what you choose, but there are numerous clubs or groups who know one another well; and likely have some most interesting discussions "about things".
Disclosure: This house must always do our best to attempt to understand the mix of politics/behaviors intertwined more so today with the large traders and their machines; to hopefully find a nominally safe and rewarding area into which to invest to stay ahead of whatever monetary fluctuations may be coming down the pathway. The Vietnam era war, forced a large number of citizens to find themselves involved with events that changed their lives and how they see things around them, forever. This includes those who were not involved in direct military duties. And we must not forget that this "boomers" group is the current largest group of citizens; who also control a great deal of wealth today. Lastly, the Vietnam era war took a midwestern boy away from a lower-middle class and stable environment setting, and fortunately without physical harm; but caused him to find a new world of everything that pulled at his normally curious mind. The resulting skills from the military duty; found a high demand afterward, in the private sector, with a premium pay scale. One year of work, and saving as much money as possible; allowed for a 2 1/2 year period of travel. Returning to the U.S. found only one dime in my pocket. A kind lady at American Airlines in NYC loaned me $3 in cash to offset the ticket price increase for the pre-paid ticket between NYC and Detroit; as the price had increased during one particular year of my travels. The travel to explore these other lands and peoples continued to open new doors of knowledge. The resulting experiences from living among others outside of this country is still paying dividends today, from the insights.
Obviously, this short paragraph is only relative to one person I know.
As expected, all of this is part of the answer as to why there will never be a total understanding or agreement upon how any one investor chooses to fashion an investment portfolio; aside from what we all try to draw from charts and/or the current real world events.
Take care,
Catch