Saturday, June 20, 2015

Stagflation And Slow Growth

Stagflation Is Comprised Of Several Factors
Words like stagflation and slow growth may be the cornerstone of the global economy for years to come and this is the positive view of what might lie ahead.  A more negative take would include words like world war, depression, and social instability. A debate rages on under the surface and in the minds of many economist and investors as to whether we will fall into the trap of deflation or inflation is in the cards. It is possible the world we encounter both with deflation raging in one country and just across the border inflation having its way and shaping the lives of all it touches. As I have written before, currencies are the "Trojan Horse" of governments and a weapon that will be used to fleece the average citizen out of his wealth.

I remind you, modern economics does not span a large period of man's history and with all the twists and turns that have taken place during its development, it makes a poor basis for future projections. The way banks are chartered and regulated, and even the use of currencies on the scales used today dates back only a few hundred years. To think those in charge of our central banks and economies have the wisdom to guide us on the path to prosperity is a bit naive. Knowing that many of those leading us honed their skills in the noncompetitive ivory towers of academia rather than in the arena of commerce should give us pause. Even before you factor in things like hidden agendas and arrogance it would not be wise to follow them blindly.

A tectonic change or shift is taking place in the economies of countries across the world. This may be the result of our economic institutions reaching a more mature state and the world reaching a point where long-term sustainability is becoming more of an issue. This has become more obvious as we now find we are busy jostling for position in the economic food chain, but this is not just for ourselves, it is for the future of both our children and our country. This can be seen clearly here in America where during the last few decades the financial sector has enjoyed tremendous growth while other sectors of the economy struggle. It could be that all this mask a future of world stagflation and years of slow growth. It is not uncommon in a stagnant business environment to also face high unemployment, this tends to breed discontentment and social unrest.

Often I lay out theories and my arguments to support them without heavily relying on charts, graphs, or statistics. This moves a great deal of what I write into the realm of opinion or speculation if that is where you chose to place it, however, when looked at closely much of the information being displayed as fact really exist in this same land. I find that personal history and past errors in judgement have a great deal of value and remember how being deeply involved in real estate during the late 1980s many people would greatly argue the current interest rates we see today could never materialize or come about. What was predicted by many and what did however occur is a drastic climb in housing and the prices of many commodities. While we have seen a pullback in some prices recently due to overcapacity as that situation corrects price increases will take root. Currently, a great deal of our inflation is being hidden behind a facade of low-interest rates on things such as auto loans

Today we are seeing countries across the world moving in fits and starts. Often what little growth they have, or statistically portend to have, being produced in flawed or modified data that is massaged and skewed. To make matters worse it usually comes on the back of massively aggressive monetary easing and from zero interest rates that misallocate resources and capital. During all this, we have become far too accustomed to moving around and postponing what needs to be done, and each day we become more complacent and accepting of the notion that we will muddle through. Structural problems have not been addressed in Europe or elsewhere. The debt crises in Greece exist in different forms in many nations. A global day of reckoning awaits; the overhanging question is just when it will arrive.

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