• 327 days Could Crypto Overtake Traditional Investment?
  • 332 days Americans Still Quitting Jobs At Record Pace
  • 334 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 337 days Is The Dollar Too Strong?
  • 337 days Big Tech Disappoints Investors on Earnings Calls
  • 338 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 340 days China Is Quietly Trying To Distance Itself From Russia
  • 340 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 344 days Crypto Investors Won Big In 2021
  • 344 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 345 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 347 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 348 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 351 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 352 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 352 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 354 days Are NFTs About To Take Over Gaming?
  • 355 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 358 days What’s Causing Inflation In The United States?
  • 359 days Intel Joins Russian Exodus as Chip Shortage Digs In
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

  1. Home
  2. Markets
  3. Other

Instability, Here We Come

Last week saw the global financial system tip from delusion -- where it had happily drifted for several years -- into chaos. Consider the following more-or-less randomly chosen data points:

French unemployment hits record high

Italian unemployment hits record high

Oil's price falls by $10.36/bbl, or 13.5%, in a single day, to its lowest price since 2010.

Copper falls by 6% to $2.86/lb, 25% below its 2013 high.

European bond yields fall to record lows. Even Italy, with government debt exceeding 130% of GDP, can now borrow for around 2%. Japan, meanwhile, issues bonds with negative interest rates.

European inflation approaches zero, with several member states apparently already in deflation.

Emerging markets see the opposite trend, as a soaring dollar causes their currencies to fall and inflation to spike. The Russian ruble falls by 7.3% to a record low, while the currencies of Brazil, Colombia, Mexico and Chile drop by at least 1.9%. See Brazil's Rousseff vows immense effort to slow inflation.

Chinese malinvestment, a topic of conversation ever since those ghost city pictures started circulating, is pegged at $6.8 trillion, or about 70% of China's entire economy.

As Prudent Bear's Doug Noland put it his November 28 Credit Bubble Bulletin, "Collapse of the 'global reflation trade' runs unabated. Where might contagion strike next?"

The answer is in one final set of stats: Last week the S&P 500 and Dow Jones Transports hit record highs, while the Nasdaq 100 index of tech stocks rose to its highest level since March 2000, just before its epic crash.

If everything but equities is being sucked into a 2008-style deflationary vortex, how much longer can US stocks hold out? Probably not long.

 

Back to homepage

Leave a comment

Leave a comment