on 11 April 2011
Equity markets are again in retreat as the weight of global debt crushes the world’s wealth. This is a perfect recipe for Bernanke to start the engines running on QE3, in whatever form that may take. It’s almost a given the Fed will try to do something. Their masters over on Wall Street will be demanding it. There will be little concern that the Fed’s last two attempts have amounted to nothing.
What's driving the sell-off? Who knows? Markets do crazy things. More than 60 per cent of total volume is done by high-frequency computer trading using brainless algorithms. But a few things stick out.
The past two weeks have understandably shaken confidence. Fearful of GFC2, investors have been fleeing the market. The worry du jour is that the US and European economies are heading into new recessions.
In the meantime, Germany’s Chancellor has reached the limit of her country’s generosity. Where will the next bailout come from when German voters are at breaking point about being asked to foot the bill for the rest of Europe? As one German taxpayer put it - and you’ll have to imagine the accent:
‘Ausländern wird Geld in den Hintern geblasen und das meiste Geld geht zu selbst verschuldeten Ländern wie Griechenland obwohl Deutschland auch schon hoch verschuldet ist.’
Loosely translated: ‘I could slap my Lederhosen ten times with a Frankfurter that Foreigners are getting our money blown up their backsides, and that most of the money is for self-indebted countries like Greece, even though Germany is highly indebted itself.’
Don't let any of this push you into panic. This too will pass, and those with a patient, long-term outlook will win. On the bright side, we're closer to the bottom than we were yesterday.
