Writing stuffs is difficult, and in other language it should be an impossible mission. In this article, i am going to try my best to do this. In my believe, things dont kill you make you stronger.
Yesterday, what a fantastic day. i enjoyed the newest edition of WSJ with a cup of hot milk. one of the articles catched my eyeball. The article begins with a quote from the former Israli Statesman Abba Eden:Men and nations behave wisely,when they have exhausted all other resources.The key point is the last half of this sentence. In details, this statement is often interpreted as a reflection on human nature and the decision-making processes of countries, particularly in the realm of diplomacy and international relations.Originally,it suggests irrational tendency for politicians in context of international relations. Meanwhile,this quote can be introduced to describe the recent phenomenon in financial and economics world.
it is an interview Paul Singer, who predicted subprime mortgages collapse before 2008. After decades-long super quantitative monetary policy, easy money, printed by central banks, has propped up valuations in different assets. As a result, we see the possibility of a lengthy period of low returns in financial assets, low returns in real estate, corporate profits. The root of this pessimistic view rooted from the answer of central banks to virtually every economic and financial challenge is to create more money.
it has also fueled the rise of cryptocurrency, which Singer describes as an “alternative for people to express a kind of libertarian impulse, a kind of disdain or criticism of central banks’ fiat money.”But, he also holds skeptic view towards that cryptos will replace gold, and states that “completely lacking in any value. It is not a substitute for gold, but it has taken away some of the demand side for gold.”
The artficial demand unleashed by central banks after 2008 financial crisis, holds down interest rates, which enables states to spend lavishly, accumulate massive debt. But he views a credit collapse as a relatively optimistic one:“Credit collapse, although terrible, is not as terrible as hyperinflation in terms of destruction wrought upon societies. Capitalism, which is economic freedom, can survive a credit crisis. We don’t think it can survive hyperinflation.” Saving, investment and commerce all depend on a trustworthy currency, so it’s imperative “to keep a good distance away from the tipping point in which confidence is destroyed.”
Asked about recent bank crisis in america, he views it as a result that the then-new Dodd- Frank law gave government officials to deal with what they deem systemic risks. Without doubt, this action encourages to destroy market discipline and encourage bankers to behave recklessly.
For investor, what they can do in this volatile market, many believe their portfolio should have some gold, as it is the only ‘real’ money and has occupied that status for literally thousands of years.
The article ends with how to deal with this scenario. what we need is would entail pro-growth reforms across the board, including tax reductions, entitlement reforms, regulatory streamlining, encouraging energy development including hydrocarbons.
It sounds excellent,but as stated at the beginning of this article,one suspects the Biden administration and the Fed see resources yet to be exhausted.
the same thing we also need to watch carefully in China. Consumers are so concerned about the future stability of income.They has rushed to repay their mortgage even the insterest rate is declining.It will be better if there is a reckoning of credit to stop government spending recklessly. Otherwise, it will be a hyperinflation in the near future.
