updates -- trotsky, 11:42:35 05/31/11 Tue
1. Some Thoughts On the EU
For decades the EU's political and bureaucratic classes and their courtier intellectuals have preached that Keynesian deficit spending is the only viable method of combating recessions - which makes it impossible for them to now explain how austerity measures may actually offer a ray of hope w.r.t. the economic outlook. A thoroughly propagandized and misinformed population continues to believe that robbing Peter to pay Paul is perfectly normal and that there is some unlimited stash of resources hidden away somewhere that the government need only redistribute.
The Greek government already began privatizing assets in the early 1990's, an effort that was abandoned due to the pressure exerted by powerful vested interests. The reality is that the state-owned assets provide a plethora of people, foremost the unions and their members, with unearned privileges on an enormous scale. The inefficiency, graft and corruption are of a breathtaking scope. If for instance the government were to pay everybody's cab fares and simply shut down the Greek state-owned railways, it would actually save money.
Hitherto the eurocracy tried to use the crisis as an opportunity to tighten its grip on power, but this ploy is increasingly backfiring, as voters everywhere in the EU boot out political incumbents and/or take to the streets in protest. Also, a look at what is arguably THE most important data point in the context of the crisis: the monetary inflation accommodated by the ECB over the past decade. The euro area's true money supply has increased by 136% in a bit over 11 years. So far the ECB has miraculously escaped the public's ire, but its monetary policies are the root cause of the euro area's boom and bust. It will be interesting to see whether the public eventually catches on to this.
acting-man.com
2. More Extend & Pretend and a Look At Stocks
Overnight, the euro 'rises on optimism over Greece' - no joke. Finally, after weeks of softening up the Greek government with threats and apocalyptic visions, the 'good cop' shows up and throws it another life line in the form of an overnight leak/rumor. We dissect the information dissemination that accompanies such sudden 'confidence changers' - evidently something had to be done before the markets went completely haywire.
Meanwhile, Greek prime minister Papandreou ponders the examples of Chile and the 'Scandinavian model' as possible paths for Greece to follow. As it turns out, the Scandinavia of today is a far cry of the sclerotic socialist model the political left admired for so long. The recent economic success of these nations is entirely due to massive market-friendly reforms that have catapulted them into the top decile on the global economic freedom index. The Greek opposition's refusal to sign off on the austerity package has hitherto not been explained in the media. As it turns out, the bone of contention are higher taxes, which the leader of the New Democrats, Antonis Samaras, rightly denounces as counterproductive.
Stocks and commodities may well find some short term support if fears over Greece dissipate in the near term. Sentiment data also suggest that the bullish exuberance evident earlier this year has declined sufficiently for such a scenario to unfold. However, this is only true of the short term oriented indicators - all the medium to longer term indicators continue to say that a storm is eventually going to break loose. This view (short term positive/long term negative) is also supported by medium and short term price divergences between stock and copper prices and the technical condition of the SPX-gold ratio.
acting-man.com |
