Wednesday, September 7, 2011

Fall 2011 Financial update.

If the currencies of the world were truly undervalued, there wouldn't be a rush into them. The reason these bonds are yielding so low is because the governments don't need to raise yields in order to sell them. This is an indicator of very high demand. The debt issue is overblown and mostly propaganda. The reason the debt issue simply shows up when it's convenient, and then goes away is good evidence of this. Further evidence is that in Japan, the debt to gdp ratio is much much higher than in the U.S. But still Japan has no inflation. If there were a true loss of faith in the dollar, the yields would be much higher (i.e. government a attempts to lure buyers with a rate of return that is higher than say.. 1%. So it would say offer bonds with a yield of 14% over 10 years. If yields were higher, we may say that there is a loss of faith in the currency because only people getting a 14% (for the sake of argument) on their bet would buy the bonds. But what we have now is major investor class players buying them up with a near zero return on investment. The phenomenon is global--and it indicates a lack of profitability in the private sector--which is creating a bottleneck into the safer issue of bonds.

As for gold, gold is a bubble in my view. Commodity speculators are able to plow into it and create massive false demand with loans that are magnified at the commercial level. So 1 actual dollar can turn into 100 financial market dollars. The theory behind allowing this is basically a super charged elite view of the economy, but the essence of it is that despite this magnifier on all financial returns on investment, there is still not enough investment in the real economy (probably because the only money values worthwhile are all people at the top--which forces them to buy and sell each other, so to speak, hot money, financial bets instead of real investment, etc).

This explains the stock market being pumped up after the 08 crash, it explains the commodity markets going sky high, but the money coming into the broad and vast majority is declining. Working class wages declined for the past 30+ years. Household income requires 2 earners, etc..