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You ever notice how a good crisis seems to change the rules? This is how we got the "Patriot" Act and now Europe is getting the same kind of hangover that the Patriot Act is. The heads of gov't are rolling as the people strike back in the polls. The people are saying they are sick of Big Gov't in cahoots with Big Business. We could probably slip in Big Banks as a sub category to Big Business in Europe's case.
France just elected a President from the Socialist party. He promises to tax the rich up to 75%. There is already talk of the wealthy crossing the channel to the UK to protect their wealth. Will this increase jobs in France? Greece had a huge uprising in their polls as well. The powers that be are being replaced rapidly. In fact the Neo Nazi party just won a bunch of seats in parliament. Doesn't sound like a positive movement to me. The people don't want "austerity" and seem to be willing to take something with the potential of ending even worse.
I read an article by Chris Oliver recently labled "Capitalism is dead, credit new king, says Duncan". Duncan believes capitalism died in 1914 when Europe abandoned gold-backed currencies. It only became worse when the U.S. abandoned the need for gold reserves backing the currency in circulation. Since then global credit has expanded from 1 Trillion to over 50 Trillion. If you aren't sure how much a trillion is, remember this: 1 million seconds is 12 days of seconds. 1 billion seconds is 33 years and 1 trillion seconds is 33,000 years of seconds. Only 9 out of the last 50 years did U.S. credit grow less than 2%. 4 of these 9 years, this slow credit growth caused recessions. We quickly began "printing" or "growing" much more rapidly to pull ourselves out of the recession. This last recession caused us to double our monetary base and many believe we are still in the last recession. This will definitely lead to inflation at some point.
There are about 1.5 Trillion US dollars in circulation in the United States. There are about 15 Trillion US dollars in Europe and Asia. As countries continue to drop the US dollar as the international currency, these dollars will flow their way back to the U.S. If there was 1 dollar in circulation today and 2 dollars tomorrow, do you think yesterdays dollar would have as much buying power? Me either. In fact the definition of inflation isn't prices getting higher, its your money buying less.
Europe is turning over as we speak. Our markets are trying to absorb all the information regarding the changes and longer term affects. Don uses this briefingto describe some of the things going on in the market and our reactions to them. Bottom line is we are exercising great caution as these unknown changes are taking place.
Have a great day!!
John Norquay CEO PivotPoint Advisors |
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Tuesday, May 8, 2012
Let The Euro Hangover Begin
Moderately Aggressive Model
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