Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
Ibuprofen Warning - The Pain Killer that can Kill You! - 29th July 15
More Ritholtz on Gold, and Another Response - 29th July 15
Crude Oil Price Is Lower – and You’re Richer - 29th July 15
U.S. Home Sales Market Is Dead – This Chart Proves It - 29th July 15
Greece- What Happens When Economists Talk Politics - 29th July 15
The Gold - U.S. House Prices Ratio As A Valuation Indicator - 29th July 15
Will Crude Oil Price Decline Continue? -Video - 28th July 15
Gold & Silver Money Has Devolved Into Debt and Plastic - 28th July 15
Buy and "Own Gold Krugerrands" Says Money Expert Jim Grant, Very Bullish on Gold - 28th July 15
How to Protect Yourself from China's Crashing Stock Market - 28th July 15
Quantum Geopolitics - 28th July 15
Gold Mining Stocks to Weather the Storm - 28th July 15
Stock Market Bulls Beware! - 28th July 15
Will Chinese Stock Market Crash Affect the US? - 27th July 15
Crude Oil Price Under $48! - 27th July 15
Are We Seeing a Trend Reversal with U.S. Interest Rates? - 27th July 15
How to Know When the Gold Bear Market is Over - 27th July 15
Gold Bear Market Phase III - 27th July 15
Silver Bull Hammer Buy Signal - 27th July 15
Gold Cracks Support and Plunges to New Lows - How Low Will Price Go? - 27th July 15
Commodity Markets Breakdown Of 2015 Is Now A Fact - 26th July 15
Gold Price at a Five-Year Low: Here’s What to Do - 26th July 15
Stock Market Primary III Inflection Point - 26th July 15
Central Banks and Our Dysfunctional Gold Markets - 25th July 15
Gold And Silver - The US Dollar Does Not Exist, Part II - 25th July 15
How Wall Street Put Apple Stock in Animal House - 25th July 15
How to Trade Markets Using the Stochastic Oscillator - Video - 24th July 15
A Bond Market Crisis Is Coming... Here's What to Do - 24th July 15
Why There's Resistance to the Iran Nuclear Deal - 24th July 15
Absurd Gold Stock Levels - 24th July 15
Gold Mining Stocks Nearing Rebound - 24th July 15
Misperceptions Create Significant Bond Market Value - 24th July 15
Commodities Distressed Investing - 24th July 15
OPEC Shorts Are Driving Down the Crude Oil Price - 24th July 15
USD Index Rebounds - 24th July 15
If You’re Worried About a Tech Bubble, You’re Focusing on the Wrong Thing - 24th July 15
Gold Stocks Bear Market Bottom Buying Opportunity? - Video
The Stealth War on the United States - 23rd July 15
Commodity Prices, Gold and Silver Stocks Next Leg Down - 23rd July 15
The ‘Real’ Reason the Fed Wants to Raise Interest Rates - 23rd July 15
Crude Oil Price Slump is a Once in a Decade Opportunity to Make Money, Guaranteed - 23rd July 15
Gold Price Hits a 5-Year Low: How to Time the Next MAJOR Bottom - 22nd July 15
Silver and the Deflation Thesis - 22nd July 15
Gold Price Crash - Trend Forecast 2015, Gold Stocks Buying Opportunity? - 22nd July 15
The Three Reasons Behind Iran’s Resistance to the Nuclear Deal - 22nd July 15
Winning the Hunger Games - How to Choose Successful Agriculture Investments - 22nd July 15
Are Free Markets The Solution? - 22nd July 15
Gold Hammered “Unprecedented Attack” - 21st July 15
The Turkish Enigma - 21st July 15
Gold and Silver: The Final Capitulation Commences - 21st July 15
Greater Israel Setback from Iranian Nuclear Agreement - 21st July 15
U.S. Housing Market: Is the Roof About to Cave In (Again)? - 21st July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

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