Sunday, May 20, 2012

Kicking the Can

Judging by the laissez-faire nature of the Heads of State at the G-8 meeting yesterday, the only plan they have ever had, kicking the can, is going to continue.  It appears Merkle understands that deflation is not in the cards for any of the Central Banks, and that her political posturing has been mere rhetoric to appear to Germans as at least trying not to spend their future on Greece and other insolvent Euro States.  Hollande, a long time French political insider, will change the European course of austerity.  This is their hope of keeping all States inside the Eurozone not before another State, like America or Japan, go bankrupt, which is a suicide pact of epic proportions.  Since the Keynsian policy model is doomed to fail, because debt does not equal growth, and it sure doesn't equal money, well spent or otherwise, there will be failures, but for now, the long term policy of can kicking continues.

Yet there are no alternative choices when it comes to economics.  It is a study deemed a 'science', and there is no aggressive movement to change it, Ron Paul excluded.  And since the media did everything in its power to defame Paul, the status quo has not changed much.  The hope is that it has changed enough, and that when the can kicking can not go any further, those that hold a different theory than printing trillions upon trillions of fiat currency to throw at the banking system will be asked to step down, and new theories will form to create a discussion outside of this Hegelian dialectic that has formed over the last hundred years.

Now that the Heads of State appear to agree to print ad infinum, the Central Banks have the green light to do so.  This should all but put a lid on the dollar's price appreciation, and a floor under equity.  If this does not happen, then pensions turn negative.  Also, since it is not just a battle of the euro vs the dollar (although it may appear that way for everyone watching), and a battle between all Central Banks, oil and precious metals will find great support at these ranges; so great that we may never see them lower.  In fact, if the photo ops from the G-8 are as they appear - a unity of fiscal and economic policy - then we may see oil and precious metals move higher soon, and quickly.

One thing that was mentioned at the G-8 was releasing oil reserves.  This is a manic decision.  The thought is because the Iran Sanctions are about to be fully levied.  The problem is that these reserves will run out, which means the price in the long term will rise.  Last time it took only a few weeks for the price to rise back up.  Is flushing the holdings of our most important resource worth a few weeks of cheap oil?  Not at all, but these policy heads are just that stupid to try.

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