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No assets can really against hypoinflation. -- theoretical - (0 Byte) 2011-2-01 周二, 11:38 (527 reads) |
边干边学
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作者：边干边学 在 谈股论金 发贴, 来自【海归网】 http://www.haiguinet.com
Inflation will destroy / 謝國忠
2011-02-01
Financial markets like to cheer loose money. When it pumps up asset markets, it feels like free money for everyone. When loose money shows up in inflation, there is a dilemma. When the inflation triggers popular riots like in North Africa, loose monetary policy causes trajedies, not just fun for financial markets.
Egypt is erupting. The pharaoh is dead. Only he doesn't know. Will tomorrow bring another pharaoh, or a democratic government? Too early to tell.
Tunisian people are fighting to ensure that the revolution isn't stolen by another dictator. They are not stopping unless the transition government isn't controlled by figures from the past regime.
The events in North Africa show how powerful the information revolution is. The people on the street know. A lot of people believe the world is controlled by a few who control the instruments of power like finance, police, intelligence agency, and military. The information revolution is pointing the other way. When knowledge spreads, so does power.
Davos is full of dignitaries again. Two years ago, with Wall Street burning, few showed up. S&P 500 just climbed to the level before the Lehman collapse. There is causality between the two. The stock markets have doubled from the 2009 lows, recovering $30 trillion in wealth. Some of it has gone into financing the talkfest in Davos.
The stock market recovery has happened due to massive liquidity injection into the global financial system by major central banks. For the first time in history all the major central banks keep interest rate near zero. Loose money has brought back asset markets and, hence, the crowd in Davos.
Loose money has caused the riots in Tunis and Cairo. The FAO food price index rose by 41% in 2010. I am sure that many clever analysts would argue that there is no relationship between the Fed's loose money and food price. The food and energy prices began to surge right after the Fed began to talk about QE 2. It is too much of a coincidence to explain away.
The revolution like in Tunisia and Egypt has profound social and economic causes. The surging food price is a trigger but won't be sufficient on its own. Corruption and oppression are common themes. Most so-called emerging economies are actually very old. They have been around forever. The fact that they are poor says something. Corruption and oppression are pretty good reasons.
Quite a few billionaires from emerging economies show up in Davos to display diversity. How many of them are not crony capitalists?
There is another wave of euphoria for emerging markets. Such across-the board enthusiasm is unlikely to be rewarded. Most economies are poor because a few people control them for personal benefits. It's bad politics, not lack of capital or growth potential, which keeps them in poverty.
The Philippines is a good case in point. It used to be rich but is poor now, because a few families control the economy. Such monopolies keep the economic efficiency low. The Philippines is even a democracy in appearance. The system is subverted by money concentration in a few hands.
The Phillipine brings another lesson about revolution. Corazon Aquino came to power in 1986 after a popular revolt toppled Ferdinand Marcos who ruled for two decades. The system has remained the same since. The same families control the country's key economic sectors. They won't open the economy to competition. Her son is president now, vowing to do what her mother wanted in 1986. It is a pretty good bet that he would fail.
The rule of law is fundamental to a functioning market economy. Most countries are poor because they don't have it. Corrupt politics, concentration of economic power, and lack of the rule of law go together. Economic hardship periodically causes popular revolt like in North Africa now. But, whatever new regime comes afterwards, without the rule of law, it would evolve again into either dictatorship or oligarchy in both political and economic power.
The current wave of enthusiasm for emerging markets will likely end up in disappointment like before. History will record it as another Fed loose money-inspired bubble.
The conflict between asset markets and inflation will intensify through the year. Even though food price index is making new highs, rice price is still low, about half of the peak level in early 2008. The odds are that the low price reflects government subsidies in East Asia, especially through releasing reserves. We don't know how long the reserves can last. When the turning point comes, the rice price could double or even triple quickly. There are a lot more rice eaters than wheat eaters in Asia. What is happening in North Africa-a wheat eating region could spread to Asia.
作者：边干边学 在 谈股论金 发贴, 来自【海归网】 http://www.haiguinet.com
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