All Posts Tagged With: "global economy"

To understand what’s taking place in China today, we need to rewind the clock about a decade. At that time the Chinese government chose a policy of growth at any cost.

Being part of the Eurozone, Greece does not have the option to devalue. Granted, such a policy is not a panacea. Interest rates would skyrocket and asset prices plunge.

The week began with your editor wondering how the bond market would choke down another $81 billion in U.S. Treasury debt. On Monday, it swallowed $40 billion in three-year notes with gusto, and even belched in satisfaction. Demand, analysts said, hadn’t been that strong since 1990-when the bond vigilantes used the bond market as a weapon to discipline government spending.

If it’s true that markets lead economies, markets are telling us that things are going to get much better. The FTSE index of emerging markets is up 99% from its March lows. The S&P 500 is up nearly 60%. And gold itself is up 25%, with much of that move coming in the last few weeks.

The press attributed this week’s rise in gold to benign causes. The end of the world seems to have been postponed – indefinitely. Bloomberg reported that a clear majority of those polled thought the world economy was recovering.

“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If as I predicted the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.”

In recent weeks, both have been in a stage of recovery. The gold price has reached $982 an ounce, close to its peak when it touched $1,000 an ounce. Oil prices fell in the recession by about 70 per cent, and have now received about 50 per cent.

In the wake of this change of heart on the part of our leaders, Americans found themselves bombarded with a predictable and relentless refrain: the free market economy has failed.