Here we are, one year later and the market seems to be mimicking 2011, setting up the indexes for a big fall. High on double secret QE 2.5 and Europes LTRO’s, the world’s central banks have unanimously pumped up the market as private equity has been fleeing the markets en mass.
What has become most troubling is the cancellation of the G-8 portion of the G-8/NATO meeting in Chicago in May. The G-8 portion has been removed not to another city, but to Camp David.
As most people know, Camp David is a pretty small and isolated retreat for our nations presidents to escape the pressures of the outside world. Security is tight and access to information of what goes on there is even tighter.
It is an unprecedented move in G-8 history and raises a number of troubling questions, such as, “just what the hell is going on?”
Place this atop the following macro backdrop.
The debt ratio’s of the Federal Reserve Banks balance sheet 19% of America’s GDP and the ECB holding a balance equal to 30% of Europe’s GDP. Texas Fed Governor Fisher recently lamented, Wall Street has become addicted to the morphine of Quantitative Easing. Only its not just Wall Street, it’s the equivalent of Wall Street the world over. Market manipulation by irregularly constituted authorities practicing Politburo style, but shorter-term, 5 month plans can only hold a rising horizontal string vertically so long.
If we could pull back the sheets of the bed China has made itself through a matrix of government owned and affiliated corporations, the western world may well look like amateurs when it comes to China’s balance sheet ratio to exploding GDP. News of empty cities built on speculation and a real estate market previously immune to deflationary forces, now depict the hard landing many economist are now predicting for China.
In Europe, the LTRO is starting to have the opposite effect intended, as it is leading to demand deposits flowing from the PIIGS to the safety of Germany and Switzerland in the event of the inevitable break-up of the euro, as senior unsecured debt to secured rockets up. Even France is not immune, and now there are calls from Geneva to retrieve Swiss gold holdings from the Feds NYC gold vaults and bring them home.
Shades of Hugo Chavez.
On the other side of the coin is the happy news out of the BLS (Bureau of Lies and Statistics) in Washington of a rebounding economy driving the most recent bull run in equities. In fact, the entire world seems to be looking to the United States as the economic engine that supports the world, a role previously assigned to the China miracle.
What’s a mother to do, and inquiring minds want to know, just what the hell is going on and where does this road take us?
That’s the one hundred trillion dollar question.
Now throw in Israel, Iran and Syria. The world hasn’t seen a drum beat like this in a decades, and arguably back almost 100 years prior to the Great War to End All Wars (WWI).
But even without this diversion, the world’s economy that is spinning on the head of a pin and if it starts to wobble the only way out is to print both physical and electronic money, as deflation is the only sin in the Keynesian world of economics.
Which brings us back to the G-8 meeting to be held at Camp David on May 19th through the 21st.
Are the realities just related coming home to roost? If so, the discussions amongst the Big 8 will need to be, in the immortal words of Barney Fife, “Zippit, zippit, zippit!”
Still, there is only one alternative, and that is some kind of organized and coordinated acceleration of money creation so as to avoid a currency war that would exasperate the world economic stage.
And if war does develop in the Middle East, keeping that war from going global is going to be no easy task. When one considers the growing bi-lateral trade agreements between Iran, the BRIC’s, and Africa, one cannot forget that the divide between the allied and axis powers of World War II fell between those countries that had bi-lateral agreements with Germany and those who did not.
By doing so, this not only cut the United States and England out of the world of international trade, it amounted to an assault upon the status of the American dollar/English pound as the worlds currency.
For a number of reason, my calendar centers upon May 5th, as a most pivotal time for the markets. And if the world finds itself in trouble, the May G-8 meeting may need all the help and secrecy it can get.
Should this be the case, you can bet the worlds central banks will be printing and inflating. The only question will be how much and how fast.
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