Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

America for Sale!

Stock-Markets / Financial Markets Apr 29, 2007 - 02:30 PM GMT

By: Clive_Maund

Stock-Markets

Many investors have been taken by surprise by the sudden strength in the broad US stockmarkets, especially given the severe structural problems of the US economy. The breakout to new highs by the Dow Jones Industrials was predicted in a Marketwatch article on 13th April, based on volume studies.

The S&P500 index has not as yet broken out to new highs, but is close to doing so and is expected to shortly. What are the reasons for this sudden strength and to what extent is it an illusion?


The US economy now has severe and intractable structural problems arising from massive and universal indebtedness which ranges across the spectrum from extremely high levels of personal indebtedness and then through high corporate debt levels and then on up to the State and Federal level. A highly geared life based on maxing out credit opportunities has become the norm across all strata of US society, but naturally such a way of life is not without risk.

For all players, from the ordinary guy on the street trying to pay his huge mortgage and keep up with his credit card payments, right up to the Fed and the government, the specter of a liquidity gridlock and a deflationary implosion is understandably the thing to be feared more than anything, even eventual hyperinflation, and the thing that needs to be kept at bay. Who was responsible for this mess? - principally the government and the Fed, but essentially everybody - including every corporation and private individual who has run a highly geared operation or lifestyle based on credit. The essential point to grasp here is that there is now no way back, no way to return to a life of financial propriety.

The flood gates were opened long ago and structural indebtedness has reached such extreme levels that any attempts to rein it in and bring it under control would quickly result in a liquidity gridlock and an inflationary implosion. A monster has been created with an insatiable appetite, and the Fed now has no choice but to keep feeding it. This is the reason for the latest wave of liquidity which is driving down the dollar and contributing to the rise in the stockmarket, but there is another factor driving up the stockmarket which we will now look at.

Some of you may recall how before the Asian Tsunami struck, the sea receded as if there was a very low Spring tide, and those folk on the beach who did not understand what that meant walked further out looking for shells or maybe sunken vessels and were doomed as the Tsunami then came rushing in. This makes a fitting metaphor for the ocean of cash - of dollars - that has been accumulated by countries such as China as a result of prolonged and massive trade imbalances with the US.

With the dollar dropping ever lower this ocean of cash, that was until recently held back like the waters before the Tsunami, is now rushing forward like a tidal wave to literally buy up America lock, stock and barrel, via its capital markets, and it's all perfectly legitimate - it's a free market, right? - or so they say. This is globalization in action, folks, so be smart and be sure to send little Johnny to Mandarin classes. The world IS NOT getting poorer, at least not in the financial sense, it's getting richer, a lot richer, driven by the powerhouse economies of Asia, principally China and soon India, where people are ambitious and want to work to make a better life for themselves and their families, and are not burdened with an entitlement mentality.

For many American workers the age of driving 2 hours to get to an office to spend the day making cups of coffee and paper aircraft and ordering stuff on the internet (as the writer used to do before he was mad enough to become self employed) are numbered - the new oriental bosses are going to take a dim view of that kind of thing. Instead, American workers will be arriving at 6 am to begin the day with Tai Chi and chanting the company anthem, followed by watercress soup for breakfast.

Ironically, this economic takeover of the United States by far-eastern interests may be what saves the country from itself. But what about the effect on the prices of commodities, specifically Precious Metals and Oil, of this global growth and rebalancing?

More follows for subscribers...

By Clive Maund
CliveMaund.com

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.


© 2005-2022 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