Archive for the ‘Inflation’ Category

That seems to be the driver in world markets since Thursday trading began in Asia.  This morning it hit the US with no investment escaping save Treasurys.

Walter Russell Mead weighs in:

  • Chinese stocks fell almost 5 percent and key real estate company stocks were down by double digit percentages as fears grow that the long-delayed bursting of the China property bubble is here;
  • the European bank crisis is deepening, with the IMF sticking to its guns about the massive capital losses faced by the continent’s banks and BNP Paribas apparently trolling the Middle East in search of a big capital injection
  • the Federal Reserve’s new worries about the economy made a deeper impression on investors than its plans to support growth
  • some US banks are starting to look shaky again.

There are many more reasons for concern.  The continuing inability of Europe to cope with the euro troubles, the political impasse over economic policy in the United States, and the deer-in-the-headlights immobility of Japan do not inspire confidence.  The emerging economies — China, India, Turkey and Brazil — face increased difficulties of their own and will not pull the global economy out of the dumps.  That large corporations are sitting on cash hoards or buying back stock rather than making new investments is bad news; that consumers are cutting down debt and doing what they can to increase their savings is good news for the long term, but bad news now.  And it seems clear that two years of frantic efforts in Washington have failed to breathe new life into the nation’s housing market.

Plus this:

I still hope the old house can weather one more storm, but it is clear that we can no longer take that for granted.  The ground under the foundations is washing away; the wind threatens to rip off the roof, and cracks are appearing in load bearing walls. Sooner rather than later we are going to have redesign and rebuild.

Financial market crashes come and go; the world may spin back into recession or the economy may wobble for a bit and then stabilize.  But we’ve had a glimpse into the abyss; in Europe, in Asia and in the Americas some of our most fundamental institutions and social policies are going to have to change.

Sobering, indeed.


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The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

— John Maynard Keynes (1883 – 1946)

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