Despite massive government and central bank stimuli, the global economy is seeing a concerning rise in defaults and delinquencies. The main central banks’ balance sheets (the Federal Reserve, Bank of Japan, European Central Bank, Bank of England and People’s Bank Of China) have soared to a combined $20 trillion, while the fiscal easing announcements in the major economies exceed 7% of the world’s GDP, according to Fitch Ratings. This is the biggest combined stimulus plan in history. However, businesses are closing at a record pace and unemployment has reached extremely elevated levels in many countries.
Continue reading The Risk of the “Bailout Of Everything”Category Archives: On the cover
Debunking The Myth Of “Gold-Backed” Currencies
Many countries claim they have “gold-backed” currencies, in an effort to try to provide security and investor confidence. However, the reality is that none of the world’s fiat currencies is even remotely gold-backed and even less so the Chinese yuan.
Continue reading Debunking The Myth Of “Gold-Backed” CurrenciesA Bounce Is Not A Recovery
The recent improvement in global PMIs and especially in employment in the United States have created a strong optimism in markets about the recovery. However, it is important to be cautious about a V-shaped recovery when the leading indicators remain weak.
Continue reading A Bounce Is Not A RecoveryWhy The European Recovery Plan Will Likely Fail
The 750 billion euro stimulus plan announced by the European Commission has been greeted by many macroeconomic analysts and investment banks with euphoria. However, we must be cautious. Why? Many would argue that a swift and decisive response to the crisis with an injection of liquidity that avoids a financial collapse and a strong fiscal impulse that cements the recovery are overwhelmingly positive measures. History and experience tell us that, indeed, the risk of disappointment regarding the positive impact on the real economy is not small.
The history of stimulus plans in the eurozone should alert us against excessive optimism.
Continue reading Why The European Recovery Plan Will Likely Fail