COMMENT: Like many, panicked out of market in October ’08, (lost on stocks value and currency) and did not get back in properly. Sovereign debt crises globally results in loss of confidence in own currency, but equal loss of confidence in other currencies. Although many talk about deflation, what we see is the constant rise in prices for essentials – food, going to the chemist, fuel and electricity, and local taxes. So to us there is inflation. Interest rates so low we cannot live on it and are eating into capital.
All of the above has turned many into traders, and most do it badly and lose even more money.
REPLY: I fully appreciate the problems from many people writing to express their thanks and regret for not finding this blog sooner. These are difficult times. The greatest problem has been people just do not grasp how much the world has really changed since 1971 and the birth of the floating exchange rate system. Paul Volcker, former head of the Federal Reserve, called it the Rediscovery of the Business Cycle. Milton Friedman noticed it was possible to have simultaneous inflation yet declining economic growth known as STAGFLATION. We are experiencing massive DEFLATION but the portion that is rising is the cost of government. Prices are rising because of a cost-push from taxation rather than a demand-boom adding to the whole confusion. This weird trend produces the worse of both worlds. Unfortunately, it will take a Crash & Burn to even get politicians in a position to look at what they are doing. Chances are, even then this is going to be a difficult sales job. They seem to be hell-bent on defending their power with riot police who are insane and appear to be willing to kill their own people for politicians. Yet, history offers a glimmer of hope if the stars are in our favor just for once.
The primary goal of this site is honestly to make you wise before your time. If we look at the world through international value, we can see trends emerge and understand them comprehending that Adam Smith was indeed correct that everyone acts in their own self-interest be it positive or negative. The net effect is the dynamic global economy. Here is a chart of the Dow expressed in Euro. The talking heads that say the market has to crash because it is over-bought, only look at things in dollars. Looking at the European indexes in dollars shows an even greater bull market there that has been driven by currency, which has European’s confused when the economy declines yet the stock markets rally. Without an international comprehension of the global economy, you are only going to lose money and your future for you cannot comprehend the trend in motion.
