Looking back all I did was look away
Next time is the best time we all know
But if there is no next time where to go?
The first rule of bubbleology is, you don’t know when they will pop, and in fact, they can expand a lot longer than you think. Or as Mr. Keynes said, markets can stay irrational a lot longer than you can stay solvent. The second rule of bubbleology is — bubbles always pop. In the last year, we’ve watched as “man of the year” Mr Bernanke flooded the world with liquidity and it has had an impact, most importantly “inflating” global currency markets, what that means over time, well, we’ll see. Doug Noland is a bubbleologist extraordinaire, he writes at the Asia Times:
The markets’ perception of “too big to fail” has for years been an integral facet of bubble dynamics. And despite all the talk of trying to rid the marketplace of this notion, the markets remain more persuaded than ever: the unfolding global government finance bubble is much too gigantic for policymakers to risk letting it come anywhere close to failing.
So, the real question is how long policymakers can keep things afloat. In the end, that depends on the real economy, and looking at that has become a Rorschach test, unless you’re unemployed, it just looks one way, pretty shitty. It certainly seems deflationary trends are fairly entrenched. The most recent inventory numbers in the US show they remain down a whopping 10% from last year. While the FT reports regulators are telling US banks to hold onto their money “until political and economic uncertainty surrounding the industry dissipates.”
Over in Europe, the roulette wheel turns to see which sovereign debt problem makes it to the front page next —
Portugal, Spain, Italy, the Brits, or back on red with the Greeks once more? Ed Harrison has good piece on the not looking too good European economy. Can everyone really export and devalue their way out of this mess?
There is one bright spot and that is Asia. And China is moving, but where? The problem with command and control economies is they push on the thing that is working until it doesn’t work anymore, and then there’s great problems. The FT reports the Chinese are indeed exporting and certainly from last year’s cratered numbers things look better, but in the last paragraph the FT notes:
The “new export orders” component of China’s official PMI fell from 53.2 in January to 50.3 in February, while the import component dropped from 53.4 to 49.1. The PMI readings are forward looking and a level above 50 indicates expansion while a level below 50 indicates contraction.
Cross-posted from Archein: remake/remodel