Best of the Week
Most Popular
1.Stock Market Continues Defying Gravity, Dow New All Time High - Nadeem_Walayat
2.America Superpower 2016 - Ian Bremmer
3.The US Dollar and the Precious Metals Complex - Rambus_Chartology
4.UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - Nadeem_Walayat
5.The “Real Flash Crash” Will Scare You to Death - Shah Gilani
6.Gold Price Trend Forecast - Bob_Louka
7.UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - Nadeem_Walayat
8.Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - GoldCore
9.Will Interest Rates Ever Rise? - BATR
10.Who’s Killing the Stock Market? - Shah Gilani
Last 5 days
Investing’s Great Struggle - 29th May 15
How Rich Countries Get Rich - Freedom, Global Poverty, and the Failure of Foreign Aid - 29th May 15
Goldman Sachs Warns “Too Much Debt” Threatens World Economy - 29th May 15
Skunk Works Engineers Supersonic Profits - 29th May 15
Gold, Silver and US Dollar Strength - 29th May 15
This New Currency Could Wipe Out the Euro - 28th May 15
US Housing Market - Something Smells Fishy - 28th May 15
US Economy – Semi b2b Amps Up its Trend - 28th May 15
U.S. Fed Exported QE Travesty: Meet The BLICS Nations - 28th May 15
World War D—Deflation - Secular Bear Markets Analysis - 28th May 15
George Soros Warns of “Third World War” - 28th May 15
Why You Shouldn't Try to Invest Like Warren Buffett - 28th May 15
Stock Markets Buy and Hold is Back! - 28th May 15
We're Now Frighteningly Vulnerable to a Bond Market Crash - 28th May 15
Austerity, Economics and Religion - 28th May 15
National Holidays London and the Magic of Legoland UK Review - 27th May 15
Imminent Stocks Bear Market Signaled by Dow Theory ... - 27th May 15
Gold Price Has Bottomed – More Evidence - 27th May 15
Three Reasons You Shouldn’t Try to Invest Like Warren Buffett - 27th May 15
Gold Is “100% Guarantee from Legal and Political Risks” States Russian Central Bank - 27th May 15
Don't Drown in the Sea of Global Debt - 27th May 15
Three Reasons Why Carl Icahn Is Wrong About Apple Stock - 27th May 15
Crude Oil Price Stochastic Signals - 26th May 15
Why the Stock Market Will Crash - 26th May 15
GDP, Inflation, Employment Economic Statistics: It’s All a Lie - 26th May 15
Introduction to Peak Food - 26th May 15
Should We Dump the Euro? - 26th May 15
A Geopolitical Net Assessment of Europe - 26th May 15
Stock Market Top in Place? - 26th May 15
Best Cash ISA SBI 2.3% - 2.8 Year Fix, UK Interest Rates 2016 - 26th May 15
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

A Somber G20

Politics / Recession 2008 - 2010 Sep 30, 2009 - 07:24 PM GMT

By: John_Browne

Politics

As a part-time member of the press corps, I had the good fortune to attend many of the public sessions at last week's G-20 meeting in Pittsburgh. As impressive as it was to closely witness the gathering of countries representing some 85 percent of the world's GDP (along with the governors of the World Bank, the IMF and the European Central Bank), it was equally remarkable to witness the immense security forces deployed to restrain those who feel the gathering harbored the forces most responsible for the world's economic and financial problems.


The meeting got off to an unexpectedly gloomy start as President Obama, accompanied by UK Prime Minister Gordon Brown and French President Nicholas Sarkozy, jointly announced the discovery of secret Iranian nuclear facilities. These revelations were eye opening, and the mood in the room was nothing short of electric. This contrasted sharply with comments offered the day before by Russian President Dmitri Medvedev, who reiterated his country's reluctance to impose tougher sanctions on Iran. As a result, the risks of continued conflict in the Middle East remain a global preoccupation, with major implications for the prices of gold and oil.

But despite the geo-political setbacks, the failure to achieve any major agreements, the somber atmosphere, and the sanguine final communiqué, the U.S. stock and junk-bond markets continued to roar in nervous volatility.

U.S. markets appear to have taken on a casino-like life of their own, while the fundamentals and even some technical measures urge caution - such as the U.S. dollar plummeting to new lows. Something just does not add up. This feeling may have been the root cause of the somber mood enveloping the G-20.

Increasingly, there appears to be a distinctly volatile disconnect between market sentiment and practical reality. It is eerily similar to the market of 1931, which presaged the second of six major downturns of the Great Depression, leaving U.S. stock markets at only 10 percent of their pre-crash values.

There are a number of concerns that have caused some of the world's shrewdest observers to be less than completely credulous about the current 'recovery.' I have repeatedly echoed these factors in my columns: continued weakness in the labor market, lack of funds for discretionary spending, the rising trajectory of debt and mortgage defaults, moribund corporate earnings, and the diversion of bank credit away from corporate borrowers to interest-bearing Fed accounts. But no amount of outcry from the skeptics seems to sway the official narrative: 'recovery is on its way.'

In the meantime, the U.S. government continues to increase its deficits, heralding a new monetary age where 'trillion' has become the new 'billion.' The dollar continues to sink to levels which now threaten its privileged position as the world's reserve. If such status is lost, the Fed will no longer be able to print limitless dollars while holding interest rates at historic lows - without facing monetary collapse. Soon, the era of low interest rates could be over.

Furthermore, the world's three largest holders of U.S. Treasuries, China (with some $800 billion), Japan ($740 billion) and Great Britain ($220 billion), may soon need access to their funds. The UK deficit is now 10 percent of GDP, making him prone to selling his U.S. Treasuries. Japan is slipping into recession and may need its dollars for internal stimulation, as might China.

On that note, I noticed that my former parliamentary colleague, Prime Minister Brown, looked a bit shell-shocked at the G-20. Perhaps this resulted from Britain's unfortunate decision to have sold the bulk of its gold reserves for U.S. dollars while gold was still trading in the $700's!

From a technical point of view, U.S. stock and junk bond markets have risen dangerously without correction, but still just short of the rebound level of a Dow 10,000 that I predicted for August. Nonetheless, these markets look vulnerable.

The unease is felt on Main Street U.S.A and in the backrooms of the G-20. It's a shame that Washington and Wall Street haven't gotten the memo.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History