MR. MARKET

by: MisS VictoriA DaviD

The 'market' (bond, commodity, stock, FX, etc.) in general, is like a supernatural entity and it can bring down the Governments. For example, the USSR (Union of Soviet Socialist Republics) came crashing down and adapted capitalism from the ruins of the old system. Recently, the Argentine middle classes lost there 'shirt' as the value of the peso crashed, due to Government debt.

At the moment, why there is a Greece crisis it is because they cannot afford to pay the interest of the bond debts. The money every three months become due. The recent turmoil has been caused because successive Governments had borrowed too much and can't afford the interest on the loans. These loans are called bond that are traded in the market. As Greece didn't have the money to pay the interest on their bonds they had to ask the EEC (European Economic Community) and the IMF (International Monetary Fund) to rescue them. That is the historic debts!

Any new borrowing by Greece is now price at 15% per annum. This is much more than the country earns, so, there is no way to pay without going bankrupt. This is the cost of the crisis that the market will bring to the door of any 'Govt.' or 'person' who ignores it.

Don't be surprised if the Euro or Sterling drops in value because Greece problems are endemic in many European countries.

YEAR 2010: ECONOMY'S DIRECTION

by: MisS VictoriA DaviD

People, mainly buyers and sellers, seem to think that today or at the moment the situation of the economy is doing well, perhaps there's no direction!

Some people think the economy is doing well, mainly those people who think it goes up. A few days ago there was a news about Chinese exports and normally when you hear this type of news and when you get people analyse it you will find that the export were something like not proper goods but something else. Such as electronics stuff or components.

So far, what people are watching when comparing the 'book' is either the Chinese economy will go down or up.

A lot of people cannot see how the Chinese economy will continue growing if everyone itself is no longer buying like America, Europe, United Kingdom or the biggest market. Most of their sales are sold to those countries that reached up to 75% or 80%.

Today, all those countries are in absolute distress, so, how can their market continue growing? There are two ways they can adapt either to export more goods to the far east in which the far east has no big middle class consumers' society or its own people could be buying more goods.

The only way its own people could buy more goods would be if the Chinese government is prepared to give their people more money which would mean increasing the value of their currency. If they increase the value of their currency the prices of their goods will go up, thus, people will buy less offers so they are in catch 22; the buying dilemma!

So, on one hand a lot of people especially fund managers want to put their money into shares, earn dividend and see growth. But the more realist people are, they can see that most growth so far comes from government spending. Those from China, Europe and America, their government just about spend much they can afford to and if they keep printing money, the bond market will stop lending them money. That was happened in Greece as I said before!

So, at the moment the stock market has come to a shaky balance between buyers and sellers because there is no direction. This is because of the export growth in China that people will think and see as a sign that the world economy is picking up. Probably, this is a growth from the very lower, much lower!

The beginning of this year there was growth after a huge down-turn and most of that growth are people, factories, countries etc. that were so frightened in that banking crisis last 2008 and 2009.

A lot of 'people' recommended replenishing inventory, which is re-stopping. It is interpreted as an up-turn in the world economy but it is not really an up-turn but a job less recovery. This is nearly when people adding put-off through fear that is why the government had the cash for clankers which brings purchasing forward and gives the illusion of growth.

WHERE ALL IN IT TOGETHER (EXCEPT THE RICH)

by: MisS VictoriA DaviD

We constantly hear the debate between those who see the need for austerity (generally on the right) and those who advocate growth (usually on the left notable the Labour party). Yet this debate is a diversion for the simple reason that we are going to get austerity whatever people want. There is no money from the bond markets as they have had enough of government debt. The fact is, you can't borrow your way out of a debt crisis! 

So far, the UK has borrowed £500bn to spend on growth policies. These Keynesian policies designed to get the economy moving have failed (so far) and will continue to do so. If the government is going to spend so much, it must direct money towards industries and technologies that the rest of the world will need. However, the the most effective way to get growth going is to cut public expenditure enough to allow tax cuts, there by giving resources to individuals and companies as they are much more efficient and creative at spending than governments.

Western governments and the big banks are in a crisis and cannot find easy answers to our current economic problems. At least ones that will get them re-elected! Witness Greece? It would be better if politicians (like Ed Balls) would tell how it is and stop peddling dangerous untruths to a gullible and frightened electorate.