What a bumpy ride 2011 was and that volatility is set to continue for the foreseeable future. In my amateur opinion the global financial crisis still has several more years to play out maybe even longer. Most recessions in the past lasted 2 to 3 years at worst and next year we will be entering the fifth year of the global financial crisis and when you look across the global economic landscape there's very little sign of those green shoots I recall economists seeing some two years ago. The cancer in the system is excessive sovereign and consumer debt coupled with Keynesian ideology of government intervention in the economy and complex financial instruments that are backed by nothing.
Everyone's looking to politicians and policymakers to fix the problems but I feel politicians will never fully tackle the problems we face due to short election cycles and the political campaigning that never ends. Governments need to cut spending, reduce welfare payments, trim the size of bloated public services and review some of the over regulation that exists within their boundaries. These are remedies that are not politically popular and we will never see a overall broad ranging solution implemented by the bureaucrats. Politician's are only interested in saving their political hides and it goes against their survival instincts to dish out some tough love to their electorates.
Australian politicians gave themselves a hefty pay rise ranging between 40% to 60% at a time where a sizeable part of the workforce has locked horns with their employers over pay rises less than 4% per annum. One politician replied "Politician pay rises are never popular" when questioned about the size of the pay rise by a reporter, that's not the point, the point is they get pay rises. The timing of this massive remuneration increase is comical. The massive pay rise is aimed at attracting the best and brightest into politics something Australia desperately needs, at least the current parliament are acknowledging their not the best or the brightest. It's just a crying shame the current serving members of parliament get their Christmas stockings stuffed with cash for the next few years before we see the best and brightest start coming through.
Back to the crisis....
The US has been running the money printing presses for QE1 and QE2, I read a staggering figure two weeks ago that since 2008 the US has doubled the size of it's money supply. So far all the perils of money printing have yet to materialise but some are saying we'll see inflation accelerate once the recovery is in full swing, there are hundreds of billions of dollars sitting with US banks just waiting to be loaned out, when this money hits the streets inflation is predicted to rise rapidly. I came across a definition of inflation last month and inflation was defined as a increase in the money supply within an economy, prices rising is not inflation but a symptom of inflation. Despite all the quantitative easing occurring in the US it hasn't helped lower it's stubborn unemployment rate that officially sits just below 10%. At least they don't have Spain's unemployment rate of 22.8% (Spain's Unemployment Rate) Over 1 in 5 Spaniards are unemployed, that's nuts, unofficially their unemployment rate must be close to 26% - 28%.
Money printing is being touted as a remedy for the European Union, the Germans have resisted some considerable pressure to allow the European Central Bank (ECB) to turn on the printing presses, but considering twelve European country banks need to raise $153 billion by next June you have to ask where's the money going to come from? The printers I say. But the irony is this printed money needs to be paid back too, so their paying off debt with borrowed money that they don't have to pay off the money they didn't have in the first place. Sounds like a Ponzi scheme.
How's this all going to end? I don't know but I suspect it will involve countries defaulting on their debt, bond holders accepting massive losses and a lot of debt being forgiven.
Nuff said.
Everyone's looking to politicians and policymakers to fix the problems but I feel politicians will never fully tackle the problems we face due to short election cycles and the political campaigning that never ends. Governments need to cut spending, reduce welfare payments, trim the size of bloated public services and review some of the over regulation that exists within their boundaries. These are remedies that are not politically popular and we will never see a overall broad ranging solution implemented by the bureaucrats. Politician's are only interested in saving their political hides and it goes against their survival instincts to dish out some tough love to their electorates.
Australian politicians gave themselves a hefty pay rise ranging between 40% to 60% at a time where a sizeable part of the workforce has locked horns with their employers over pay rises less than 4% per annum. One politician replied "Politician pay rises are never popular" when questioned about the size of the pay rise by a reporter, that's not the point, the point is they get pay rises. The timing of this massive remuneration increase is comical. The massive pay rise is aimed at attracting the best and brightest into politics something Australia desperately needs, at least the current parliament are acknowledging their not the best or the brightest. It's just a crying shame the current serving members of parliament get their Christmas stockings stuffed with cash for the next few years before we see the best and brightest start coming through.
Back to the crisis....
The US has been running the money printing presses for QE1 and QE2, I read a staggering figure two weeks ago that since 2008 the US has doubled the size of it's money supply. So far all the perils of money printing have yet to materialise but some are saying we'll see inflation accelerate once the recovery is in full swing, there are hundreds of billions of dollars sitting with US banks just waiting to be loaned out, when this money hits the streets inflation is predicted to rise rapidly. I came across a definition of inflation last month and inflation was defined as a increase in the money supply within an economy, prices rising is not inflation but a symptom of inflation. Despite all the quantitative easing occurring in the US it hasn't helped lower it's stubborn unemployment rate that officially sits just below 10%. At least they don't have Spain's unemployment rate of 22.8% (Spain's Unemployment Rate) Over 1 in 5 Spaniards are unemployed, that's nuts, unofficially their unemployment rate must be close to 26% - 28%.
Money printing is being touted as a remedy for the European Union, the Germans have resisted some considerable pressure to allow the European Central Bank (ECB) to turn on the printing presses, but considering twelve European country banks need to raise $153 billion by next June you have to ask where's the money going to come from? The printers I say. But the irony is this printed money needs to be paid back too, so their paying off debt with borrowed money that they don't have to pay off the money they didn't have in the first place. Sounds like a Ponzi scheme.
How's this all going to end? I don't know but I suspect it will involve countries defaulting on their debt, bond holders accepting massive losses and a lot of debt being forgiven.
Nuff said.
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