Bart.
I saw Puplava featured an essay by Mish FSO's market wrap-up today:
financialsense.com
I do believe Mish even pays homage to your recent discussions (smile).
Mish's article leads me to ask a number of questions. I'd be interested to know if your (or anyone else's) reading of the data leads you to have any opinions regarding the following questions:
1 - Supply-demand fundamentals for Energy and Food
Do the supply-demand fundamentals for the necessities of life - particularly energy and food - look to be changing in any fundamental way? My understanding is that there would have to be very serious demand destruction in the US and Europe to materially offset the combination of growing demand in the emerging economies (most particularly China) and the supply constaints imposed by peak oil (peak everything?). Is this a correct interpretation of the situation?
2 - Supply-demand fundamentals for Credit
With the enormous amount of debt and dramatic undercapitalization of our current global financial system, is it inevitable that we witness massive banking failures? Is the
US Banking system uniquely under-capitalized and insolvent? Or is this a global phenomenon? (Note: I do believe that Canada's banks and financial system are in MUCH better shape ... just as they were in the 1930's).
Is China's domestic economy strong enough to decouple from a global credit bust? I know this was the opinion of the folks from GaveKal (although they may have been thinking more a global credit slowdown as opposed to bust).
Of the enormous amounts of debt accumulated in the global economy, does a large amount of this debt ultimately get defaulted on? Or, is it paid back in inflated monetary units?
What of the glut of Treasuries and US credit instruments held by foreign investors and central banks? Is their a glut? In a global credit contraction, are these credit instruments cashed in for US$ to purchase raw materials, energy, gold, and US corporations? Or does the US invade Iran, and thereby extend the life of the so-called Petrodollar?
3 - Consumer Prices
And at the intersection of the supply-demand fundamentals for raw materials, and the supply-demand fundamentals for Credit, what emerges as the sustainable medium-term trend for consumer prices of the essentials of life: food, energy, water, and sound money?
Do the forces of global contracting credit and money in circulation overwhelm the near decade-long trend of rising commodity prices? Or, does the a world nearing "peak everything" and the emergence of an industrialized Chindia overwhelm the "paper money markets" of the over-indebted global financial system?
I don't know the answer to these questions. And I'd appreciate any insight anyone could give on their view of these topics.
Lastly, I know Mish appears to be a controversial topic on this board, and I don't wish to bash his views. My earlier post regarding the dialogue between Russ and Mish a couple years back was not meant to denigate Mish's views. Rather, just to point out that, from my perspective, Mish stuck to a particular end-game perspective that colored his interpretation of "real-time" data. But as far as the ultimate end-game ... who knows, perhaps he will be correct.
Personally, I am fascinated by the ultimate end-game of our present predicament - and to my limited perspective, it could just as easily be a deep deflationary depression as it could be a hyperinflationary depression. I'm also leaning more and more these days to the possibility of global military conflict to effect a complete monetary reset.
I mean, it's so sad, but that's probably the path of least resistence, no? Rather than having to pay the debts you ran up in a 70-year period of an orthodox liberal monetary regime, why not just collapse the game and start with new rules? I mean all along, it would appear that rules aren't really about justice or economic principle, but really, I guess ultimately about mechanisms for maintaining power and effecting social control. And if it's time to do a global "rule reset", well let's get on with it already. ... Same as it ever was.
Anyway, a fascinating, if scary, world we do live in.
glenn |
