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Global Economic Downturn to Continue? (Read 99046 times)

perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #465 - Jul 12^th, 2011 at 8:59am

Wall St dives on Italy worries

US stocks slumped this morning, as another round of anxiety over Europe's debt crisis spurred investors to flee risky assets like stocks.

The Dow Jones Industrial Average dropped 151.44 points, or 1.20 per cent, to 12,505.76, as investors rushed for the US dollar, gold and other perceived safe havens. The Standard & Poor's 500-stock index slid 24.31 points, or 1.81 per cent, to 1319.49, with all sectors in the red. The Nasdaq Composite tumbled 57.19 points, or 2.00 per cent, to 2802.62.

Euro-zone anxieties widened beyond Greece as a panic over Italy's government debt and banking sector yesterday triggered a 4 per cent drop in Italy's FTSE MIB stock index. Spain was also in focus after the new leader of the Castilla La Mancha region said the area's government has a budget deficit more than twice as large as previously thought. Italian and Spanish yields jumped to euro-era records.

The latest euro-zone developments spurred worries the continent's debt crisis is spiralling out of control, threatening to create a wider emergency for global markets. The sell-off overshadowed investors' hopes for US corporate earnings season, which kicked off unofficially today.

"Sentiment has shifted back to 'glass is half empty,'" said Mark Luschini, chief investment strategist at Janney Montgomery Scott. The pessimism started with a weak reading on US employment Friday, Mr Luschini said. It set the stage for a more dramatic sell-off today with signs of worsening in Europe's debt crisis.

"The concern is whether we are getting another financial crisis relating to sovereign debt," said Alan Gayle, chief investment strategist for RidgeWorth Investments.

Link -
http://www.theaustralian.com.au/business/markets/wall-st-dives-on-europe-worries...
=====================================
The truth is, this is what spooked the Australian share markets yesterday, not the Carbon Tax!

Or, at least, this and a mixture of the other Global concerns I have written about.

Btw, the US$ index spiked nearly a full cent yesterday, in the usual "flight to quality", because of renewed jitters about Italy and the other European Piigs, whilst the Euro dropped to 1.4067 against the US$, after closing last Friday at 1.4264.

However, the sick joke is that the US Economy, Debt situation & Currency, is actually worse than most of the European Piigs!
Go figure?

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Amadd Gold Member Offline Mo Posts: 6217	Re: Global Economic Downturn to Continue? Reply #466 - Jul 12^th, 2011 at 10:51am Quote: "The concern is whether we are getting another financial crisis relating to sovereign debt," said Alan Gayle, chief investment strategist for RidgeWorth Investments. Gee whiz..how could those two aspects ever be related?
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Ex Dame Pansi

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Re: Global Economic Downturn to Continue?
Reply #467 - Jul 12^th, 2011 at 5:04pm

Not surprisingly, Paul Krugman writes in the New York Times:

“So let's summarise: the economy isn't fixing itself. Nor are there real obstacles to government action. Both the bond vigilantes and structural unemployment exist only in the imaginations of pundits. If economic stimulus seems to have failed, it's because it was never actually tried.”

In other words, spending trillions isn’t to blame. The government and U.S. Federal Reserve should have created and spent more money. That would have fixed it.

We and many others warned at the time, creating and spending trillions of dollars wouldn’t help the economy recover. That in fact, it would make things worse.

You can look at the U.S. to see that’s the case. And don’t forget Europe. Italy is on the verge of economic collapse. And as Slipstream Trader, Murray Dawes said this morning, “the Italian market is down over 8% in a couple of days.”

And as for the Greek bailout... Have you seen the yields on Greek bonds recently? Look at this:

http://clicks.portphillippublishing.net//t/AQ/AAYllQ/AAYyAw/AARTjw/AQ/AinhKQ/E39C

Yes. That’s the yield of the bond. Not the price. If you buy Greek bonds today you’ll get the equivalent of a 31.11% yield!

In common financial parlance, that’s called a “junk” bond. But we think of junk bonds having yields from 10-20%. So this is worse than junk… it’s toxic… it’s radioactive… it’s… just plain ‘orrible.

To say these are dominoes falling over is a cliché. But it’s true. Once one country falters it’s not long before others fall too.

And it doesn’t even matter whether other countries or their banks hold Greek or Italian debt or not. Which is why we found it funny when local commentators tried to say Australia would be fine because our banks don’t hold much – if any – Greek debt.

The fact is, they don’t have to. In terms of risk management, every investment across the world is connected…

Haven or Danger

At the moment, the U.S. dollar and U.S. bonds are seen as an investment haven. That means all other investments are “dangerous”… and that includes Australia and Australian investments.

Of course, not all danger is the same. There’s varying grades of danger.

It means, if investors are adverse to risky assets at a certain price, “dangerous” markets need to do something to attract them. How can they do that? Simple. They offer higher interest rates.

Because at some point investors will accept the higher risk in return for a higher return. Look at the Greek bonds. At 5%, no-one but the European Central Bank will buy Greek debt.

But in the free market, investors will accept Greek bonds… but only at a huge discount to face value – hence the 31% interest rate.

Yet the price action isn’t limited to the bond market. The gold market is signalling trouble too.

Here’s the Aussie dollar gold price:

http://clicks.portphillippublishing.net//t/AQ/AAYllQ/AAYyAw/AARTkA/AQ/AinhKQ/PfNA

The past few days has seen a big move.

It’s risen for two reasons. One: investors are fearful and so the U.S. gold price has moved higher. And two: the Aussie dollar has dropped. This has magnified the gain for Aussie dollar gold (it’s up $24 this morning compared to a USD$12 rise for the U.S. gold price).

"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #468 - Jul 12^th, 2011 at 7:13pm

Ex Dame Pansi wrote on Jul 12^th, 2011 at 5:04pm:

Not surprisingly, Paul Krugman writes in the New York Times:

“So let's summarise: the economy isn't fixing itself. Nor are there real obstacles to government action. Both the bond vigilantes and structural unemployment exist only in the imaginations of pundits. If economic stimulus seems to have failed, it's because it was never actually tried.”

In other words, spending trillions isn’t to blame. The government and U.S. Federal Reserve should have created and spent more money. That would have fixed it.

We and many others warned at the time, creating and spending trillions of dollars wouldn’t help the economy recover. That in fact, it would make things worse.

You can look at the U.S. to see that’s the case. And don’t forget Europe. Italy is on the verge of economic collapse. And as Slipstream Trader, Murray Dawes said this morning, “the Italian market is down over 8% in a couple of days.”

And as for the Greek bailout... Have you seen the yields on Greek bonds recently? Look at this:

http://clicks.portphillippublishing.net//t/AQ/AAYllQ/AAYyAw/AARTjw/AQ/AinhKQ/E39...

Yes. That’s the yield of the bond. Not the price. If you buy Greek bonds today you’ll get the equivalent of a 31.11% yield!

In common financial parlance, that’s called a “junk” bond. But we think of junk bonds having yields from 10-20%. So this is worse than junk… it’s toxic… it’s radioactive… it’s… just plain ‘orrible.

To say these are dominoes falling over is a cliché. But it’s true. Once one country falters it’s not long before others fall too.

And it doesn’t even matter whether other countries or their banks hold Greek or Italian debt or not. Which is why we found it funny when local commentators tried to say Australia would be fine because our banks don’t hold much – if any – Greek debt.

The fact is, they don’t have to. In terms of risk management, every investment across the world is connected…

Haven or Danger

At the moment, the U.S. dollar and U.S. bonds are seen as an investment haven. That means all other investments are “dangerous”… and that includes Australia and Australian investments.

Of course, not all danger is the same. There’s varying grades of danger.

It means, if investors are adverse to risky assets at a certain price, “dangerous” markets need to do something to attract them. How can they do that? Simple. They offer higher interest rates.

Because at some point investors will accept the higher risk in return for a higher return. Look at the Greek bonds. At 5%, no-one but the European Central Bank will buy Greek debt.

But in the free market, investors will accept Greek bonds… but only at a huge discount to face value – hence the 31% interest rate.

Yet the price action isn’t limited to the bond market. The gold market is signalling trouble too.

Here’s the Aussie dollar gold price:

http://clicks.portphillippublishing.net//t/AQ/AAYllQ/AAYyAw/AARTkA/AQ/AinhKQ/PfN...

The past few days has seen a big move.

It’s risen for two reasons. One: investors are fearful and so the U.S. gold price has moved higher. And two: the Aussie dollar has dropped. This has magnified the gain for Aussie dollar gold (it’s up $24 this morning compared to a USD$12 rise for the U.S. gold price).

There are things being stretched in all directions and those playing the cards would need to be super-human, to avoid the Economic house of cards from collapsing.

Contrary to the opinion of some, these people are not super-human!

In fact, many who seem to be of the opinion that they are born again financial masters of the univers, are actually just greedy & dumb!

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #469 - Jul 14^th, 2011 at 11:27am

Moody's Puts US's Aaa Rating On Watch For Possible Downgrade

Moody's Investors Service put its Aaa rating on the U.S. government's bond rating on watch for possible downgrade, citing the "rising possibility that the statutory debt limit will not be raised on a timely basis," which would lead to a default on U.S. Treasury debt obligations.

The ratings agency said in conjunction with Wednesday's action, Moody's placed on review for downgrade its ratings on financial institutions directly linked to the U.S. government, including Fannie Mae (FNMA) and Freddie Mac (FMCC).

Negotiations in Washington have continued as government leaders seek to ensure the country's debt ceiling is increased before an Aug. 2 deadline. Meetings appear to have ground to halt in recent days amid partisan bickering between Democrats and Republicans about how to cobble together a deal that both sides can live with.

Moody's on Wednesday said the ratings action was prompted by the possibility the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes. As such, Moody's wrote there is "a small but rising risk of a short-lived default."

Moody's said an actual default, regardless of duration, would fundamentally alter the agency's assessment of the timeliness of future payments, and that the Aaa rating would likely no longer be appropriate. However, because that type of default would likely be short-lived, the rating would most likely be downgraded to somewhere in the Aa range, Moody's said.

If the debt limit is raised again and a default is avoided, the Aaa rating would likely be confirmed. Moody's did note the outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless "substantial and credible agreement is achieved on a budget that includes long-term deficit reduction."

The warning for a possible downgrade comes after Standard & Poor's Ratings Services in April cut its outlook on U.S. government debt to negative from stable for the first time in history, citing ongoing concerns over the long-term fiscal health of the nation.

Link -
http://online.wsj.com/article/BT-CO-20110713-714624.html
=============================================
There are games, within games, with the US actually already in the similar territory to Japan, the UK & the other Piigs of Europe, IF NOT WORSE!

The fact that they (the US) have not been downgraded, has more to do with them (the US) still being THE major influence on the Global Economy and that the Ratings Agencies are based in America!

It is likely there are still many more twists & turns, in this modern epic, but the trend is clear and by the end of 2012, the future of the Global Economy should be clear, to almost all!

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perceptions_now Gold Member Offline Australian Politics Posts: 11694 Perth WA Gender:	Re: Global Economic Downturn to Continue? Reply #470 - Jul 19^th, 2011 at 8:35am Gold hits US$1,600
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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #471 - Jul 22^nd, 2011 at 7:21pm

Clowns to the Left, Jokers to the Right

http://ilene.typepad.com/.a/6a010536583aff970b01538ff9556a970b-450wi

As the clock ticks down to the impending August 2 deadline for lifting the debt ceiling, negotiations between the White House and Capitol Hill are growing increasingly tense. Lawmakers and the president attempt to arrive at a compromise that will inevitably satisfy no one.

“But the Democrats cannot agree to the Republicans' absolutist demands, in part because the arithmetic of deficit reduction does not work without tax increases and cuts in defense spending, in part because they passionately believe that with taxes the lowest for 50 years, the US's rich should share in the pain and in part because in any human exchange there is an element of horse-trading.”

Financial economist and historian Dr. Michael Hudson was recently interviewed by Bonnie Faulkner on Guns N Butter. When Ms. Faulkner asked his opinion of where the U.S. economy is headed, Mr. Hudson replied,

“The economy’s going under because Wall Street and investors realize that it’s a done deal. That Mr. Obama is going to succeed in pushing the economy much further into a depression. We need the depression in order to cut living standards and labor by 30 percent. We need a depression in order just to lower the wages of America and to have an excuse – of course, a depression is going to make the budget deficit even larger and the solution to the depression has already been written up, just like the invasion of Iraq was all written up before 9/11, the solution is going to be that the government is going to sell off its land, whatever is in the public domain.

“The American government is going to look just like Greece and just like Ireland. They’re going to be told, ‘The states can’t pay, there’s no federal revenue to share with Minnesota or Wisconsin or the city of Chicago. They’re going to have to sell off their roads, sell off their streets, sell off their infrastructure, sell off their public utilities, sell off their business. The government will sell whatever it has, the Postal Service, to essentially buyers who will now borrow the money from the banks making a huge new market for banks and investment bankers, in privatizing and cutting up what used to be the public domain and turning it over to the wealthiest 10 percent of the economy. So people realize yes, the class war’s back in business. We’re going into a depression. We’ll buy back all these stocks after they go but meanwhile, the game’s over. Let’s grab what we can and just bail out. And that’s what’s happening now.”

Link -
http://seekingalpha.com/article/280224-clowns-to-the-left-jokers-to-the-right-we...
=============================================
Great cartoon!

As I have said previously, I am of the opinion that there will be a last minute deal to avert the immediate Debt ceiling issue, but that will not, in fact can not avert the final outcomes, which should become apparent to almost all, by the end of 2012!

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Andrei.Hicks

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Re: Global Economic Downturn to Continue?
Reply #472 - Jul 22^nd, 2011 at 8:37pm

Tell me why this is such a bad idea -

1) Cut subsidies to Amtrak
2) Reduce public sector workforce by 15%
3) Privatize Freddie and Fannie
4) Removal public subsidy of lawyers defending Obamacare
5) Cut unnecessary elective surgery medicaid packages
6) Free medicare subsidy

Will cut over $2.4 TRILLION in spending from the US budget.

This is the Republican proposal. So bad?????

Seems sensible to me. We're spending too much so why not cut what we spend?

Anyone who lives within their means suffers from a lack of imagination - Oscar Wilde

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #473 - Jul 23^rd, 2011 at 12:16pm

Andrei.Hicks wrote on Jul 22^nd, 2011 at 8:37pm:

The US, like many other countries, has not balanced their books, for quite some time.

Being in the figures area you would be aware of GAAP accounting, which the US and other nations DO NOT comply with. If they did, the US and many other countries, as well as many BANKS would NOW BE BANKRUPT!

The majority of Political "Leaders", Bankers & TPTB have been aware for some time that the current squeeze would eventuate, but in the main they took no or little action to defuse the ticking timebomb.
History may ask why, but it may not?

In any event, we now find ourselves ate the crossroads of history, with little to no alternatives.

As i said, many countries & banks, are or should be already Bankrupt and we are only at the beginning of a turning tide of a change in Global Economics, which will be influenced by Demagraphics (Ageing & actual reductions), by effects of Peak Energy and finally by Climate Change.

Yes, reductions in expenditure will have to happen, but that will cause a further decline in Public Consumption, just at the worst possible time, with Demagraphic & Peak Energy factors already providing downward momentum.

However, IF the pain is not spread sufficiently via all sectors, including the top 10% & Business, then spending cuts alone will fall short.

In terms of your US$2.4 Trillion spending cuts, I assume you are referring to the 10 year period currently being thrown around and that won't even come close to what is needed.

In terms of Fannie & Freddy, their current Debts are reported at around US$5 Trillion and climbing. That Debt still has to be born, so if they (or their replacements) are to serve the same purpose, why would any private market want to get into a business that is going to lose mountains of money?

Finally, with Pension & Health Care costs, particularly for an Aging Baby Boomer generation, set to cost between US$50-$70 Trillion and those costs being totally unfunded, there is virtually NO possibility that those obligations will be met and it would appear certain that the US will renege on those obligations, either in full or in part, as will many other nations.

The ensuing knock on effects, in the USA & Global, from this Ageing timebomb, plus the Peak Energy & Climate factors ARE UNIQUE IN HISTORY and the final outcomes will provide the future currently expected by the vast majority of the Global Population.

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #474 - Jul 25^th, 2011 at 4:18pm

Soros Is 75% in Cash

Though he is not one of my favorite people in the industry it isn’t really possible to doubt the investing acumen of George Soros. Over the years many have made a good bit of money in markets by simply mimicking his strategies. The most recent, however, is hardly worthwhile replicating for most investors.

Apparently, George’s flagship Quantum Fund currently has 75% of its assets in cash. Another sign that the even the most heavyweight financial players are unsure of the situation and that August 2011 is beginning to look more and more like August 2008.

Hoarding cash is usually a signal of uncertainty or extremely bearish beliefs. In today's uncertain environment, however, it can be considered a growth strategy and hedging instrument. Presumably Quantum’s cash is spread out over a basket of currencies ready to hop from one to the next if some sort of market shattering event occurs.

Soros has recently viewed his bearish perspective on Europe and is one of an increasing number of insiders claiming that Greece must be sent packing from the monetary union. As we full well know, cataclysmic events can often act like catalysts for markets. Perhaps the great cash hoard is akin to an army stockpiling weapons in expectation of a great battle. Soros has been known to play dead before and I wouldn’t put this seemingly risk averse move beyond being an aggressive strategy in passive clothing.

Link -
http://seekingalpha.com/article/281321-soros-is-75-in-cash?source=email_macro_vi...
=================================
The truth is, the period ahead is fraught with enormous danger and Economically the trend is to the Downside, so good luck & watch the Debt!

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #475 - Jul 27^th, 2011 at 2:24pm

Australian dollar hits post-float record high

The Australian dollar has surged to a new record high, after stronger than expected inflation figures raised expectations of a rate hike by the central bank.

The consumer price index (CPI) rose 0.9 per cent in the June quarter, for an annual inflation rate of 3.6 per cent, the Australian Bureau of Statistics (ABS) reported on Wednesday.

The Australian dollar was trading at 109.60 just prior to the data release at 1130 AEST, but quickly rose to a post-float high of 110.62 cents, on speculation the central bank may need to raise the cash rate to keep a lid on inflationary pressures.

The domestic currency reached its previous high, since the currency was floated in December 1983, on May 3 this year of 110.11 US.

Underlying measures of inflation calculated by the ABS grew on average by 0.9 per cent in the quarter for an annual rate of 2.7 per cent.

"The signal for the RBA is crystal clear and if they are in any way competent, they will hike rates at the next meeting (in August)," said Adam Carr, senior economist at ICAP.

"The consequences of them delaying for another six months could be dire in 2012.

"They really need to get a grip and do what is good for the country."

Link -
http://www.businessspectator.com.au/bs.nsf/Article/Australian-dollar-hits-post-f...
===============================
It seems that vested interests are still harping on about increasing interest rates!

Again, I make it clear that inflation is being drive by increasing costs, mainly relevant to Energy Cost increases.

Consumer Demand, which is the usual reason for increasing interest rates to dampen Demand, is actually already slow and slowing further, as those increasing Energy costs bite into disposable income!

In short, any increase in interest rates now or in the short to medium term, would have an adverse effect on the Australian Economy.

The Truth is, the OZ$ is rising, mainly due to the US$ falling.

In my last report on the "Mighty US$" on July 9th, the US$index was at 75.12, it sits at 73.51 today, owing mainly to recent uncertainty on the US Debt limit issue.

However, I do agree with the comment that the RBA really does need to get a grip and do what is good for the country, because things are so finely balanced that A WRONG MOVE BY THE RBA could indeed mean DIRE CONSEQUENCES!

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Ex Dame Pansi Gold Member Offline Australian Politics Posts: 24168	Re: Global Economic Downturn to Continue? Reply #476 - Jul 27^th, 2011 at 3:39pm The American Dollar
Back to top	"When the power of love overcomes the love of power, the world will know peace." Hendrix andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up..... IP Logged

Ex Dame Pansi

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Re: Global Economic Downturn to Continue?
Reply #477 - Jul 29^th, 2011 at 5:29pm

Conservative revolt postpones crucial US vote

REPUBLICAN leaders in the US House of Representatives, facing a conservative revolt, have abruptly postponed a vote on legislation to avert a threatened government default and slice federal spending by nearly $US1 trillion.

“The votes obviously were not there,” conceded Representative David Dreier, after Speaker John Boehner and the leadership had spent hours trying to corral the support of rebellious conservatives.

The decision created fresh turmoil as divided government struggled to head off an unprecedented default that would leave the Treasury without the funds needed to pay all its bills.

Administration officials say Tuesday, August 2, is the deadline for Congress to act.

President Barack Obama has threatened to veto the House bill, and the White House taunted Republicans as they struggled.

“Another day wasted while the clock ticks, now is the time to compromise so we can solve this problem and reduce the deficit,” tweeted communications director Dan Pfeiffer.

Senate Democrats stood by to scuttle the bill - if it ever got them - as a way of forcing Republicans to accept changes sought by Obama.

The first sign of trouble for the House's supporters occurred after hours of routine debate, when the Republican leadership suddenly halted work on the measure.

As the evening slipped by Mr Boehner summoned a string of Republican critics of the bill to his office.

Based on public statements by members of congress, it appeared that five of some two dozen holdouts were from South Carolina.

Others said conservatives wanted additional steps taken to try to ensure that a constitutional balanced-budget amendment would be sent to the states for ratification.

As drafted, the legislation merely requires both houses of Congress to vote on the issue.

Another option under review was to wait for the Democratic-controlled Senate to pass legislation first, a reversal in Republican strategy that would increase Obama's leverage.

With the bill in limbo, a few first-term conservatives slipped into a small White House chapel as they contemplated one of the most consequential votes of their careers.

Many more congregated in the office of the chief Republican vote counter, Kevin McCarthy, perhaps drawn to the 19 boxes of pizza that were rolled in. Mr Boehner joined them but did not speak to reporters.

Earlier, Mr Boehner had exuded optimism.

“Let's pass this bill and end the crisis,” said the president's principal Republican antagonist in a new and contentious era of divided government.

“It raises the debt limit and cuts government spending by a larger amount.”

Wall Street suffered fresh losses as Congress struggled to break its long gridlock. The Dow Jones industrial average was down for a fifth straight session.

Administration officials have warned of potentially calamitous effects on the economy if the country defaults on its obligations - a spike in interest rates, a plunge in stock markets and a tightening in the job market in a nation already struggling with unemployment over nine per cent.

White House press secretary Jay Carney outlined White House compromise terms: “Significant deficit reduction, a mechanism by which Congress would take on the tough issues of tax reform and entitlement reform and a lifting of the debt ceiling beyond... into 2013.”

http://www.theaustralian.com.au/news/world/crucial-us-debt-vote-delayed/story-e6frg6so-1226104027887

"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....

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Ex Dame Pansi

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Re: Global Economic Downturn to Continue?
Reply #478 - Aug 2^nd, 2011 at 5:12pm

The global downturn is continuing, and the Aussie economists are starting to get the hang of it, better late than never.

But the market barely had time to set off the last firecracker of excitement when…

“Growth worries kill debt deal rally”, says the Financial Times.

And you only have to look at the other headlines from the FT to see even the mainstream are getting the hang of things:

“Downturn or something worse?”

“Worries over weak recovery”

“Wall Street erases gains after weak data”

“S&P under pressure over US credit rating”

“IMF casts doubt on UK deficit plan: Report says economy has less capacity to grow than hoped”

We could go on. But you get the message. (Aaron has a summary of last night’s market action below.)

Will the RBA fiddle again?

But what about the stuff happening closer to home? Such as this afternoon’s Reserve Bank of Australia board meeting.

You may have seen the news last week that Australia’s consumer price index (CPI) was higher than many expected.

The annual price inflation rate stands at 3.6%.

Of course, that’s only the official number. Real price rises in the real world have been much higher. According to the Sayce household’s latest water bill, the unit price increased by over 15% from 1 July.

And as someone who trundles into Safeway in Frankston each weekend to do the shopping – unlike most of the bigwigs at the RBA, or the economists at the major banks who wouldn’t know a shopping trolley if one ran over their toes – we can tell you it’s a darn sight harder to shop within our budget than it was one or two years ago.

And we’re not talking 3.6% difference either.

Of course we’ve warned about the threat of inflation since 2005 when we started writing for our sister newsletter, the Daily Reckoning. Unlike the Jonny-come-lately’s who have only just caught the inflation bug.

Even so, it’s amusing to see the surprise amongst the mainstream. Because they never saw it coming… despite the signs. What signs? Erm, how about soaring commodity prices and the soaring Aussie dollar for starters.

The thing is, they saw the signs. But they had the wrong interpretation.

It wasn’t China after all!

When they saw commodity prices going up, they said it was demand from China and a strong global economic recovery.

When they saw the rising Aussie dollar, they said it was because Australia was a haven from risk and the Aussie dollar had become a pseudo-reserve currency.

Wrong.

It was and still is an inflation play. And a risk play.

In the same way the Brazilian Real is an inflation play. Both countries rely on commodity exports. That makes both currencies, commodity currencies.

You don’t need to be a hotshot trader to figure out that’s likely to have a big impact on the exchange rate.

The Brazilian government tried to do something about the rising Real by setting a 1% tax on currency transactions. The idea is that because currency traders use leverage and rely on small gains to make profits, a 1% tax would make trading unprofitable.

It’s still early days – the tax was only introduced last week – but odds are all it will do is add more volatility to the currency as traders place bigger bets on a market move... trying to push the market further than otherwise.

http://www.moneymorning.com.au/20110802/why-this-recovery-stinks.html

"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #479 - Aug 3^rd, 2011 at 1:51pm

Market Erases 2011 Gains on Recession Concern

Stocks tumbled as the Standard & Poor’s 500 Index had its biggest one-day loss in a year and erased its 2011 gain, while Treasury yields fell to the lowest levels since November, after an unexpected drop in consumer spending added to concern the economy will slide into a recession.

The S&P 500 fell 2.6 percent to 1,254.05 at 4 p.m. in New York, dropping for a seventh straight day in its longest slump since 2008.

Recession Odds
The odds of another U.S. downturn are rising amid cutbacks in spending by consumers and the government, according to five of the nine members of the panel that dates recessions. Harvard University economics professor Martin Feldstein, one of the members of committee at the National Bureau of Economic Research, said he sees a 50 percent chance that the U.S. will relapse into another recession.

“Nothing has given us much growth,” Feldstein said today in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene.

The Dow sank 265.87 points, or 2.2 percent, to 11,866.62 for its biggest loss since June 1. The S&P 500 closed at its lowest level since Dec. 20, while the Dow ended the day at its weakest since March 18.

Fitch Ratings said the U.S. remains under a review as the nation’s debt burden increases at a pace that isn’t consistent with an AAA sovereign credit rating. The U.S. needs to confront “tough” choices on tax and spending against a weak economic backdrop if the budget deficit and government debt is to be cut to safer levels over the medium term, Fitch said.

‘Ugly Contest’
“In this U.S.-versus-Europe ugly contest, it’s hard to decide where to start from,” analysts at BNP Paribas wrote in a research note. “The economic slowdown is blatantly obvious in the large drop in U.S. manufacturing. And the issue of a U.S. downgrade remains open. Things are looking less comfy in Europe too, with Italy spreads again under severe pressure.”

Link -
http://www.bloomberg.com/news/2011-08-02/stocks-retreat-on-signs-economies-are-s...
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Obama's Next Step On Debt: Tax Rich To Pay Fair Share

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So, the DOW went down 266% -
http://au.finance.yahoo.com/echarts?s=^DJI#symbol=^dji;range=1d;compare=;indicat...
And, the All Ords is currently down over 90 points -
http://au.finance.yahoo.com/q?s=^AORD

Obama is talking about raising taxes on Business & high income earners and that is likely to be fought every inch of the way.

Does anyone see where this is all heading?

Let me give you some indications, from Share market view -
OZ All Ords - 1985-2011
http://au.finance.yahoo.com/echarts?s=^AORD#symbol=^aord;range=my;compare=;indic...

US DOW 1928-2011
http://au.finance.yahoo.com/echarts?s=^DJI#symbol=^dji;range=my;compare=;indicat...

In the shortish term, between now & the end of 2012, the US DOW may well hit 7,600 and the OZ All Ords around 3,000.

In the somewhat longer term, the DOW & the All Ords are likely to revisit the levels where the current bubble started in 1995, with the US DOW retracing to around 4,000 and the OZ All Ords going back to around 2,000?

And, there endth my Nostradamus predictions, for now!

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