Merkel's inflationary fretting may wake the bears from hibernation

[HairyArsedBloke]

In a nutshell?

Sorry, didn't spot it earlier.

It's something to do with the country around the time of Independence and 'the west' being the otherside of the Mississippi. Or some such bollo.

[BrilloPad]

Your Politicians have been discredited.

Your future prosperity depends upon your co-operation with the New World Order.

Place your trust in the New World Order.

Hello Nicky G

[Platypus]

O/T
Unless you have an hour to spare to be lectured on American history, never ask a septic why that region is called the midwest when it is in the north and largely in the east. I made that mistake many years ago ....

In a nutshell?

[Central-Scrutiniser]

Your Politicians have been discredited.

Your future prosperity depends upon your co-operation with the New World Order.

Place your trust in the New World Order.

[ASB]

Unlike everybody else who seems to think that the question is whom to bail out, I have noticed your point, which is how Chrysler is to be bailed out. The Obama administration is doing a plain and simple Robert Maxwell to find the money: they are taking Chrysler workers' and former workers' pension funds to do it, despite the fact that those funds are legally the workers' and are only administered by the Chrysler pension fund.

What next, after that?

If, and it is a very big if, the effective working capital from the workers pensions provides viable productive capital then it is a good thing. Ultimately this should benefit said workers.

However, I thought that the money being used was underwritten by the government, thus insulating workers from the downside. If this is not the case then yes, they are doing a complete Maxwell.

[expat]

Have you seen how they're bailing out Chrysler? Well to my mind it actually breaks US pension laws. How do they think they can get away with it? And from a moral standpoint it is quite disgusting.

Unlike everybody else who seems to think that the question is whom to bail out, I have noticed your point, which is how Chrysler is to be bailed out. The Obama administration is doing a plain and simple Robert Maxwell to find the money: they are taking Chrysler workers' and former workers' pension funds to do it, despite the fact that those funds are legally the workers' and are only administered by the Chrysler pension fund.

What next, after that?

[suityou01]

Why do you think that, when debt is still increasing nearly everywhere that matters, with no end in sight?

I'm just interested.

Sure, good question. My opinion largely stems from the political mechanism of "making order out of chaos". For example, take an oil rich region, send in your average insurgent, and cause no end of civil unrest. Then once the region is like hell on earth, send in the cavalry to make peace. The locals will go with whatever you tell them as "anything is better than this!" Once in power (elected), arrange to plunder the natural resources for your own ends. The point is that you funded both sides of the argument.

Take the eurozone. We have one agenda (Lisbon Treaty) and two problems. Ireland and The Czech Republic. Never waste a good crisis, so during the global credit crisis, squeeze these two nations into accepting the treaty. Once signed up, push it through and then announce to the world what a good thing it is. The lisbon treaty will lift europe out of the global recession, it will be heralded as the end of the bad times, and our saviour? Bliar.

So you see, the global credit crunch has largely served it's purpose. Documents have been signed, the wheels are in motion. This will be the greatest global cooperation ever, singing the praise of the global community. Global is good, global is strength, global is the way forward. The next few years will be all about reaching out around the world and unity.

In the background will be greater snooping, ID cards, CCTV and big brother stuff.

So in answer to the original question, the lisbon treaty is creating the order out of chaos, so needs to demonstrate order. That is why the economy will stabilise.

[Doggy Styles]

I suspect that this year will be the year that Eurozone finally gets it's president. Then the economy will settle out.

Why do you think that, when debt is still increasing nearly everywhere that matters, with no end in sight?

I'm just interested.

[suityou01]

Actually, none of what is happening in the markets makes any sense. The long projected bear rally is still going, and investor confidence is increasing. I have heard many different stories and apparently the FTSE 100 is supposed to develop a holding pattern for the rest of the year.

Bilderberg are allegedly planning to reinflate the bubble, and then burst it again, with even worse bottoms than before.

Who knows what will happen. I have doom mongered on here for months, but at the moment I am days away from meeting suityou01 child number 3 and can't help from being dizzy with the thought. Life is good!!

Then, after Freddie is born it will be business as usual on the doom front.

I can't help but think that recent news, Korea, expenses row, middle east, is merely a side show distracting from what is really going on. I suspect that this year will be the year that Eurozone finally gets it's president. Then the economy will settle out. Then again, what do I know.

[BrilloPad]

O/T

Tip:

Unless you have an hour to spare to be lectured on American history, never ask a septic why that region is called the midwest when it is in the north and largely in the east. I made that mistake many years ago ....

[HairyArsedBloke]

Rather the bailing out the car industry they shoul create jobs elsewhere in the midwest.

O/T

Tip:

Unless you have an hour to spare to be lectured on American history, never ask a septic why that region is called the midwest when it is in the north and largely in the east. I made that mistake many years ago ....

[BrilloPad]

Have you seen how they're bailing out Chrysler? Well to my mind it actually breaks US pension laws. How do they think they can get away with it? And from a moral standpoint it is quite disgusting.

Rather the bailing out the car industry they shoul create jobs elsewhere in the midwest.

[threaded]

Have you seen how they're bailing out Chrysler? Well to my mind it actually breaks US pension laws. How do they think they can get away with it? And from a moral standpoint it is quite disgusting.

[BrilloPad]

http://www.telegraph.co.uk/finance/c...bernation.html

Merkel's inflationary fretting may wake the bears from hibernation
It is lonely in the diminishing camp of bears

Those of us who still question whether the world has purged its toxins are reduced to the same tiny band of moaning Druids from early 2007, when we shook our heads in disbelief as the carry trade swept Iceland to fresh madness and bankers laughed off sub-prime rot at Bear Stearns.

We learned then to thicken our skins with walnut juice, lie down in dark rooms, and dissent from Goldman Sachs. Such seclusion is called for once again as Goldman replays its BRIC anthem and raises its oil forecast to $85 a barrel this year, betting that the world will roar back on a tidal wave of liquidity.

It is perhaps unkind to mention that Goldman issued a $200 call at the top of the speculative frenzy last year, just before oil crashed, but they have broad shoulders.

Note that Total's Jean-Jacques Mosconi said markets are awash with so much crude that almost 100m barrels (a near record) are stored on tankers at sea. Note too that May electricity use fell 10pc in China's industrial hub of Guangdong from a year earlier. This is revealing, given that China's fiscal boost has reached peak and will fade later this year.

For guidance on where we are in this long-drawn saga, I look to Berkeley's Barry Eichengreen, author of the Great Depression classic Golden Fetters – which avoids the error of viewing the 1930s through a US prism.

He has crunched the latest data with Trinity College Dublin's Kevin O'Rourke for VoxEU, concluding that the global rupture over the last nine months has been more violent than in the early slump. This is logical. Global debt leverage is much greater this time.

The fall in industrial output has been roughly equal to the 1929-1930 stage for Germany and the Anglo-Saxons, but worse for Japan, France, Italy, and Eastern Europe. The collapse in world trade has been swifter: the global equity crash has been twice as bad. "It's a depression alright. The good news is that the policy response is very different. The question now is whether that response will work," they said.

The elastic was bound to snap back, just as it did in the bear rally of early 1931. Whether the underlying economy has begun to heal is another matter. World Bank chief economist Justin Yifu Lin said capacity utilization is running at an historic low of 50pc-60pc. Companies will have to fire a lot of workers. This is where the danger lies, and why he fears that deflation is creeping up on us.

Trade data from Asia are flashing warning signals again. Korea's exports were down 28.3pc in May, reversing the April rebound. Malaysia has slipped to -26pc, and India has touched a new low of -33pc.

US freight data is getting worse, not better. The Association of American Railroads said traffic was down 22pc in the third week of May from a year earlier. Canadian freight was down 34pc.

The American Trucking Association (ATA) said it saw fresh drops of 4.5pc in March and a further 2.2pc in April. Tonnage is down 13pc over 12 months. Bob Costello, the ATA's chief economist, said companies have not cut inventories fast enough to keep pace with declining sales. The contraction in truck volume has "accelerated".

Yes, the Baltic Dry Index for bulk shipping of resources has quadrupled since January, but this reflects China's bid to stockpile metals while prices are low.

Stephen Roach, Morgan Stanley's Far East chief, fears an "Asian Relapse", saying the region is prisoner to its fatal dependency on exports to the West. The export share of GDP has risen from 36pc to 47pc across developing Asia over the last decade.

"China's incipient rebound relies on a time-worn stimulus formula: upping the ante on infrastructure spending in anticipation of an eventual rebound of global demand," he said. The strategy cannot work this time because Americans have exhausted their credit, and their desire to borrow. Consumption will fall from its peak of 72pc of GDP to the "pre-bubble norm" of 67pc, if not more.

David Rosenberg from Gluskins Sheff expects Americans to retrench ferociously as 78m baby boomers face the looming threat of penury in old age. "The big story is that the personal savings rate hit a 15-year high of 5.7pc in April. I believe it could test the post-War peak of 15pc. Too many pundits are still living in the old paradigm of Americans shopping till they drop," he said.

If he is right, this will shatter the surplus economies of China, Japan, and Germany, unless they adjust fast to the new world order. Germany does not even seem to understand the problem it faces. Chancellor Angela Merkel lashed out last week at quantitative easing by the Fed, the Bank of England, and the European Central Bank, repeating the silly mantra that this will set off an inflationary storm.

How can it do so when the velocity of circulation has collapsed, and unemployment is rising everywhere? The Fed's "monetary multiplier" ended last week at 0.867, half its average of 1.7 over the last decade. The credit mechanism is still broken. This is what happened in Japan in its Lost Decade.

The ECB says the eurozone economy will contract until mid-2010, at best. Germany's trade association (Wirtschaftsverbände) warned Mrs Merkel last week that the credit drought threatens to become "life-threatening by the summer at the latest".

The list of countries in deflation is growing every month: Ireland (-3.5), Thailand (-3.3), China (-1.5), Switzerland (-1), Spain (-0.8), the US (-0.7), Singapore (-0.7), Taiwan (-0.5), Belgium (-0.4), Japan (-0.1), Sweden (-0.1), Germany (0).

Yet markets seem to think otherwise, and this has its own awful consequences. Inflation fears have driven 10-year US Treasury yields to 3.86pc, a full point above levels in March when the Fed intervened to force rates down. US mortgage rates have jumped to 5.29pc. Gilts have reached 3.92pc, and French 10-year bonds are at 4.05pc.

This bond revolt is enough to bring any global recovery to a shuddering halt. The irony is that those fretting loudest about inflation may themselves tip us into outright deflation, with all the perils of a debt compound trap. It is Angela Merkel who plays with fire.