This Is No Recovery, This Is a Bubble – And It Will Burst
GEORGE OSBOURNE IS AN ECONOMIC LIAR
I WORKED FOR MANY YEARS IN THE FINANCIAL INDUSTRY
MAKING DATAFEED INTERFACES
GEORGE OSBOURNE AND GORDON BROWN MADE MANY STATEMENTS DURING THIS TIME
THAT I KNEW WHERE EITHER BLATANT LIES!!
OR COMPLETE INCOMPITANCE BOARDERING ON SABOTAGE ,GRAND THEFT AND FRAUD!!
THIS BRITISH FINANCIAL MUPPET SHOW CONTINUES!!
INSTEAD OF ARRESTING THE GUILTY BANKERS AND INSURANCE SALESMEN
THIER DEBTS WHERE PASSED TO THE INNOCENT TAXPAYER
THE BUBBLE BLOWING INDUSTRY COULD CONTINUE!!
TODAY WE FACE ANOTHER FINANCIAL BUBBLE THAT IS GOING TO BURST AND
LIKE A DROWNING MAN GOING DOWN FOR THE THIRD TIME
WE MAY NOT POP BACK UP THIS TIME!!
According to the stock market, the UK economy is in a boom. Not just any old boom, but a historic one. On 28 October 2013, the FTSE 100 index hit 6,734, breaching the level achieved at the height of the economic boom before the 2008 global financial crisis (that was 6,730, recorded in October 2007).
Since then, it has had ups and downs, but on 21 February 2014 the FTSE 100 climbed to a new height of 6,838. At this rate, it may soon surpass the highest ever level reached since the index began in 1984 – that was 6,930, recorded in December 1999, during the heady days of the dotcom bubble.
The current levels of share prices are extraordinary considering the UK economy has not yet recovered the ground lost since the 2008 crash; per capita income in the UK today is still lower than it was in 2007. And let us not forget that share prices back in 2007 were themselves definitely in bubble territory of the first order.
The situation is even more worrying in the US. In March 2013, the Standard & Poor 500 stock market index reached the highest ever level, surpassing the 2007 peak (which was higher than the peak during the dotcom boom), despite the fact that the country’s per capita income had not yet recovered to its 2007 level. Since then, the index has risen about 20%, although the US per capita income has not increased even by 2% during the same period. This is definitely the biggest stock market bubble in modern history.
Even more extraordinary than the inflated prices is that, unlike in the two previous share price booms, no one is offering a plausible narrative explaining why the evidently unsustainable levels of share prices are actually justified.
KNOWS THE PRICE OF EVERYTHING
AND THE VALUE OF NOTHING!!
During the dotcom bubble, the predominant view was that the new information technology was about to completely revolutionise our economies for good. Given this, it was argued, stock markets would keep rising (possibly forever) and reach unprecedented levels. The title of the book, Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market, published in the autumn of 1999 when the Dow Jones index was not even 10,000, very well sums up the spirit of the time.
Similarly, in the runup to the 2008 crisis, inflated asset prices were justified in terms of the supposed progresses in financial innovation and in the techniques of economic policy.
It was argued that financial innovation – manifested in the alphabet soup of derivatives and structured financial assets, such as MBS, CDO, and CDS – had vastly improved the ability of financial markets to “price” risk correctly, eliminating the possibility of irrational bubbles. On this belief, at the height of the US housing market bubble in 2005, both Alan Greenspan (the then chairman of the Federal Reserve Board) and Ben Bernanke (the then chairman of the Council of Economic Advisers to the President and later Greenspan’s successor) publicly denied the existence of a housing market bubble – perhaps except for some “froth” in a few localities, according to Greenspan.
At the same time, better economic theory – and thus better techniques of economic policy – was argued to have allowed policymakers to iron out those few wrinkles that markets themselves cannot eliminate. Robert Lucas, the leading free-market economist and winner of the 1995 Nobel prize in economics, proudly declared in 2003 that “the problem of depression prevention has been solved”. In 2004, Ben Bernanke (yes, it’s him again) argued that, probably thanks to better theory of monetary policy, the world had entered the era of “great moderation”, in which the volatility of prices and outputs is minimised.
This time around, no one is offering a new narrative justifying the new bubbles because, well, there isn’t any plausible story. Those stories that are generated to encourage the share price to climb to the next level have been decidedly unambitious in scale and ephemeral in nature: higher-than-expected growth rates or number of new jobs created; brighter-than-expected outlook in Japan, China, or wherever; the arrival of the “super-dove” Janet Yellen as the new chair of the Fed; or, indeed, anything else that may suggest the world is not going to end tomorrow.
Few stock market investors really believe in these stories. Most investors know that current levels of share prices are unsustainable; it is said that George Soros has already startedbetting against the US stock market. They are aware that share prices are high mainly because of the huge amount of money sloshing around thanks to quantitative easing (QE), not because of the strength of the underlying real economy. This is why they react so nervously to any slight sign that QE may be wound down on a significant scale.
However, stock market investors pretend to believe – or even have to pretend to believe – in those feeble and ephemeral stories because they need those stories to justify (to themselves and their clients) staying in the stock market, given the low returns everywhere else.
The result, unfortunately, is that stock market bubbles of historic proportion are developing in the US and the UK, the two most important stock markets in the world, threatening to create yet another financial crash. One obvious way of dealing with these bubbles is to take the excessive liquidity that is inflating them out of the system through a combination of tighter monetary policy and better financial regulation against stock market speculation (such as a ban on shorting or restrictions on high-frequency trading). Of course, the danger here is that these policies may prick the bubble and create a mess.
In the longer run, however, the best way to deal with these bubbles is to revive the real economy; after all, “bubble” is a relative concept and even a very high price can be justified if it is based on a strong economy. This will require a more sustainable increase in consumption based on rising wages rather than debts, greater productive investments that will expand the economy’s ability to produce, and the introduction of financial regulation that will make banks lend more to productive enterprises than to consumers. Unfortunately, these are exactly the things that the current policymakers in the US and the UK don’t want to do.
We are heading for trouble.
Ha-Joon Chang teaches economics at the University of Cambridge in London. He is the author of the forthcoming book, 23 Things They Don’t Tell You About Capitalism (Allen Lane).
WESTERN REPRESENTATIVE POLITIONS CANNOT RUN AN ECONOMY EITHER
FYI 181ST IS LAST PLACE!!!
NOTICE THE 4 BIGGEST DEBTOR NATIONS WHERE THE NATIONS THAT GOT LIED INTO ILLEGAL WARS!
THEY ALL HAVE MAJOR ELITE PAEDOPHILE RINGS AS WELL…WHERE DID THOSE IRAQI WMD’S DISAPPEAR TOO?
Rank Country CAB USD, bn
1 People’s Republic of China 371.833
2 Germany 252.501
3 Japan 210.967
4 Saudi Arabia 95.762
5 Russia 76.163
6 Switzerland 70.797
7 Norway 59.983
8 Netherlands 52.522
176 Greece -44.218
177 Italy -52.725
178 Australia -56.342
179 United Kingdom -105.224
180 Spain -145.141
181 United States -731.214
This is a list of countries and territories by current account balance (CAB), based on the International Monetary Fund data for 2007, obtained from the latest World Economic Outlook database (October 2008).
WITH THE DOLLAR AND THE POUND AND THE EURO
ALL FIAT CURRENCIES(POTENTIALLY WORTHLESS)
THE US ,UK AND THE EU ARE ALL DESPERATELY STEALING WEALTH FROM OTHER PEOPLE TO PAY THIER BILLS
THUS A LOT OF ILLEGAL WARS ARE GOING ON
IN LYBIA ,SYRIA , UKRAINE ,VENEZUALA ,IRAN AND HIATI
ALL EYES ARE ON CHINA
All Eyes on Gold and China
CHINA IS DUMPING FIAT CURRENCIES AND COLLECTING GOLD
SCOTLAND CAN RESCUE ITSELF FROM THIS BRITISH AND EUROPEAN FINANCIAL MUPPET SHOW
A FINANCIAL MUPPET SHOW THAT HAS NO FUTURE BUT ETERNAL DEBT SLAVERY
AND ILLEGAL WARS
AND CONTINUED POLITICAL PAEDOPHILE RINGS
PLEASE VOTE YES 2014
PLEASE VOTE FOR SCOTTISH INDEPENDENCE!!
FIGHTING FOR PEACE IS LIKE FUCKING FOR VIRGINITY!!!
THE STATE MILITARY MAKE US ALL LESS SAFE!!
IF YOU HAVE TO PUT ON A UNIFORM
AND UNQUESTIONINGLY OBEY ORDERS
AND YOU ARE IN SOMEONE ELSES COUNTRY KILLING PEOPLE
YOU ARE NOT A HERO
YOU ARE THE PROBLEM!!!!
BRITISH ECONOMIC STRENGTH OR I’M FOREVER BLOWING BUBBLES
This Is No Recovery, This Is a Bubble – And It Will Burst