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The only "fundamental" is Central Banks press releases


Mercury

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Over the weekend China issued poor economic data and Japan followed up with some more.  Recent past data from both these countries has been poor and in the case of China maybe we are beginning to see the true picture now.  Q1 corporate results have been poor and retail data suggests consumers are not spending.  Everyone is worried about growth and everyone is finally noting that central bank actions have not, and never will, produce the desired (by government) result of higher inflation.  On the BBC website there was a very interesting article forecasting poor wage growth in the UK and the backdrop to that.  [ http://www.bbc.co.uk/news/business-36298587 ]   In short organisations don't need to pay their people more.  The same organisations also want inflation but how can that happen if the consumers aren't being pair more?  This is a typical example of the mismatch between macro economics and micro management inside companies (i.e. the two expressions of intent and desire are mutually exclusive).  Something has to give.

 

 

 

And yet the Asian stock markets rose overnight!  Can it be that traders in the world markets are still drunk on stimulus?

 

http://www.bbc.co.uk/news/business-36299548

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Ha, how strange the BBC forgot to mention the main reason for low or nil wage growth is mass immigration, and that employment growth is mostly part-time jobs. From a nation of shopkeepers to a nation of Baristas. The wonderful thing about part-time jobs is that the tax payer gets to pay housing benefit, tax credits, income support etc. What could possibly go wrong? 

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Now that's fighting talk!  Check out this article, which basically calls into question the data being used by the people in charge of the financial markets and economies.  If "real" inflation has been so high over the past few decades, and let's face it that is not hard for us consumers to see, then why haven't the official figures borne this out?  If "real" prices right now are in a sharp decline (again not had to see on "Main St" then why aren't the powers than be recognising the deflation in progress right now?

 

It is the ostrich tactic in action in real time.  As usual there are two sides to the debate but most commentators not hidebound by economic theory (dogma) nor paralysed by the fear of being blamed are saying that we will either have a massive deflationary period OR a massive hyper-inflationary period, neither of which is a good scenario.  Will be fascinating to see which one wins out, my bet is for deflation.  Why?  Because people just can't afford things anymore: up to their eyeballs in debt they can't take advantage of ultra low interest rates; can't afford stratospheric house prices; aren't getting wage rises to fuel spending over the basics; are shifting to low cost options like Aldi and Lidl.  Where is the growth going to come from?  Where is the inflation going to come from?

 

Bring on Brexit and watch the house of cards collapse and protect yourself by being in cash and gold. After the fall (and it will be in all assets except perhaps gold) those who are cash rich will make a killing.





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