Is the Debt Fuelled Economic Recovery Sustainable?
News_Letter / Financial Markets 2009 Nov 02, 2009 - 01:05 AM GMTBy: NewsLetter
The Market Oracle Newsletter
October 31st, 2009 Issue #82 Vol. 3
Is the Debt Fuelled Economic Recovery Sustainable?Dear Reader The U.S. Economy bounced backed strongly in the third quarter, following Euro-zone second quarter recovery which is not so surprising given the amount of debt fuelled economic stimulus spending. Britain lags behind awaiting its bounce back in the fourth quarter due to the relative size of its financial sector. Is the economic recovery sustainable ? Normalisation of the worlds economies from the economic free fall stage implies gradual withdrawal of unprecedented stimulus measures such as zero interest rates, deficit spending and quantitative easing, which means many negative measures will be adopted to fill the fiscal gap, i.e. spending cuts and tax risks. This implies forward economic weakness for some countries more than others i.e. those that lack a manufacturing base which have basically funneled their stimulus into consumption of overseas manufactured products, which again puts Britain at the top of the list to suffer a double dip recession. In the immediate future the UK government is going to continue to burn more money into the next general election which will set Britain up for deep second recession during 2011, as out of control perpetual money printing risks an eventual currency crash into hyperinflation so is NOT an option. A lot now hinges on whether the post 2011 government has the will to put Britain onto a path of REAL economic recovery i.e. will we get a strong Thatcher-esk government or another dithering incompetent Brown-esk government. Financial Markets Stock Market volatility surged during the week with wild gyrations pushing stocks to the low for the week which brings the trend to a similar amount in points terms as the earlier down trend into the start of October. Meanwhile the U.S. Dollar clawed its way back above USD 76 keeping the USD bull market scenario alive, whilst Gold ended a little lower on the week, all three trends were inline with last weekends quick analysis. I will cover stocks, gold and the dollar in depth in Sunday's special newsletter as it is not possible to arrive at a quick take on especially stocks and gold. Ensure your subscribed to my free newsletter. Some good news for Market Oracle readers, we are in the process of securing timely FREE access for our readers to Robert Prechter's premium financial markets forecasting services by mid next week, the details of which we will update by email so again ensure your subscribed to our free newsletter. The plan is to include, Robert Prechter's Latest Elliott Wave Theorist issue, New Financial Forecasts Issue, and Three issues of his short-term updates. All for FREE without obligation to purchase. Trading Lesson - Get in Synch with the Market In our fast paced computer age of easily placed online stop and limit orders across a multitude of markets has meant that traders like never before have removed themselves from the price action where the focus is invariably on the latest indicator, tool or theory to analyse what will happen next rather than spending time actually watching and imprinting the price action in real time onto ones brain. Not so long ago market charts had to be drawn by hand, this meant that one was forced to stay focused on the price action as it unraveled before one which generates greater FOCUS for one is more in tune or in synch with the market i.e aware of the changing character of the market which can warn of a significant imminent market moves, instead traders today are immersed in countless indicators that distract them from the market price into a state of confusion as if the phrases of convergence and divergence to the price carry's any real meaning, which is ever only clear in hindsight. I suggest that if you really want to learn to trade then forget about using the computer generated charts, you need to draw these by hand, add trendlines and support resistance levels and nothing more, do this in real time so the most appropriate time frame would be the hourly chart. Yes this means you only trade one market at a time, but that is how it should be! As you actually watch and interpret price action for your single market in real time, you will gain new insights into its character and changing behaviour and get in synch with the market, something you will not gain from any indicator, all of which distance one from the unfolding price action by introducing far too much complexity in its interpretation. Example of being in synch with the market. Source: http://www.marketoracle.co.uk/Article14675.html Nadeem Walayat Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved. Featured Analysis of the Week
Most Popular Financial Markets Analysis of the Week :
By: Martin_D_Weiss Last week, I showed you the most shocking numbers I’ve seen in my lifetime: Up until the day Lehman Brothers collapsed in September of last year, it took the Fed 5,012 days — 13 years and 8 months — to double the cash currency and reserves in the coffers of U.S. banks.
By: Bob_Chapman Last week Federal Reserve credit declined $12.9 billion, up 21% yoy. Fed foreign holdings of Treasury/Agency debt rose $4.1 billion to a record $2.865 trillion. Custody holdings for foreign central banks expanded at a 17.5% rate ytd, and yoy 15.2%. M-2 narrow money supply fell $23.3 billion to $8.341 trillion, that is 5.9% yoy.
By: Nadeem_Walayat Britain's Great Depression caught the mainstream commentators and academic economists off guard (again), as the UK economy failed to grow by 0.2% in the third quarter as widely expected but rather contracted by another 0.4%. However the trend remains inline with my analysis and forecast of February 2009 that called for a low in the third quarter of 2009 followed by a small increase in GDP for the fourth quarter of 2009.
By: John_Mauldin What's a Fed to do? We get talk about tightening and taking away the easy credit, but we got the fourth largest monetization on record last week. This week we examine the elements of deflation, look at some banking statistics that are not optimistic, and then I write a reply to my great friend Bill Bonner about why it's the best of times to be young. I think you will get a few thought-provoking ideas here and there.
By: Michael Kirk In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
By: LewRockwell It must be really painful to be an economist of the mainstream today, or, at least, it should smart to some extent. In a financial and economic calamity of the current scale, people naturally want to know who issued the warnings about the real estate bubble and its likely aftermath.
By: Garry_Abeshouse This is a follow on to my October 13th 2009 posting , British Pound A Major Disaster Just Waiting to Happen? and my market update on October 19th, and deals with the markets as they stood as of last trade Friday October 23rd.
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