Global Market Watch – May 16th, 2014
Interest Rates
In reality, easy-money policies and below-normal interest rates are here for a long time to come. We are seeing pressure on the labor market still has not fully recovered from the financial crisis and recession. We are at twice the level where we were prior to the economic turn in 1929 that became the Great Depression. With government at the state and local levels in contraction and even the Post Office is hiring only part-time to avoid pension, the future outlook for unemployment is one of a steady rising market (decline in employment) with no hope in sight without economic reform.
Accordingly, the Fed will only very gradually move to raise rates looking at the labor market. They will get very confused when the stock market breaks out into a bubble. However, this will be capital trying to get out of banks primarily in Europe. These trends are highly charged. Nonetheless, rates are too low and this creates more deflation for the elderly, baby-boomers going into pensions, and the pension funds themselves who are being driven out of government bonds.
Larry Summers has set the stage. We will not merely see low-interest rates, we will see NEGATIVE interest rates as well. Welcome to the Spiral of Deflation where pretty much the only thing that rises historically has been the off-the-grid tangible assets. That will be stocks, real estate, collectibles, etc.
Rising Taxes – Deflation & Inflation Simultaneously
COMMENT: Hi Marty,
Again you’re proof correct.
In Switzerland where government and its administration already destroyed the 80-year-old pillar of freedom, the bank secrecy, for all foreign customers, and has been putting the heads of thousands of US clients plus their bank advisors on the block, the admin now is proposing to also extend this procedure to all Swiss citizens.
It’s ONLY about taxation – everywhere..
J
REPLY: This is why I think honestly the government starts these conspiracy theories to confuse the public to constantly blame groups who are hiding in the shadows bent upon world domination. These stories make great banter. However, it is government that is raising taxes absolutely everywhere you look. It is government that is collapsing. The highlight the disparity between the “rich” and blame that widening spread. This justifies raising taxes and handing government more power.
However, the disparity between the rich and poor is based entirely upon investment income – not wages. We are in the throes of Asset Inflation, not Monetary Inflation from Fed stimulation. That would be indicated by a broad-base rise in everything including wages. We are seeing asset inflation with capital trying to get out of banks and off the grid. Agriculture is rising because of a drop in supply. Therefore, we are NOT experiencing the classic Monetary Inflation at this time.
The cost of government is rising exponentially and that leads to higher taxes and that is the deflationary spiral that prevent monetary inflation at this time. The unfunded pensions are also causing taxes to rise at the state and local levels – more deflation. Consequently, we are getting the classic mixed bag and you have to differentiate between each type.
The HIGHER the taxes. the lower the living standards and greater the deflation. This causes more capital to move off the grid resulting in the collapse of liquidity and rising tangible assets like high-end real estate, collectibles, and art. However, this reduces general consumer demand and this sets the stage for the economic implosion.
Update on Services
Looks like we will be launching the next page in the Global Market Watch next week. This will include the reversals, arrays, and charts. This has been in beta testing with clients and we have taken their suggestions to heart. We will provide a video demo shortly.
The next phase will be to open up the capital flows models that will be displayed on a map of the world so you can see the flow of capital internationally.
We will also provide the computer trading recommendations and interactive access to Socrates. We are testing this phase on all stocks in China and Europe as well.
Additionally, we will be providing the BIG MOVERS and portfolio monitoring. Furthermore, the asset allocation models are being input as well. This should be implemented before year-end.