Events develop beyond our control. We seem to be smart. Nobel prizes. Plenty of PhD’s. Famous chairmen of the Fed adulated like gods. Presidents associated with the best of times. Executives thought to have exceptional managerial skills – to learn they left a company on the brink of bankruptcy.
We like to believe. We need to believe. We are afraid of “revolting”, as the French thinker Camus would say. Because we do not know the outcome.
Asking for more is an expression of revolt. We want more because survival and well-being is our priority. We ask those controlling wealth and power for help. They give because it is a way to keep our revolt in check. Controlling the flow of resources is the ultimate expression of power. Power and wealth, however, have to deal with the dynamics of the markets.
GM workers asked and “revolted”. Management gave, recognizing the consequences, but letting the problems fall on the shoulders of the next generation. The Greeks asked and achieved their objectives through “revolt” (strikes). Portugal, Spain, the UK, and Italy have followed the same path.
Now the markets are catching up with the generosity of those in power. Slowly, whatever resemblance of wealth these countries enjoyed is being destroyed by forcing the populace to pay the bondholders.
We thought to be wealthy. It was a mirage. The demographics and the politicians encouraged our beliefs. Standards were lowered. The “revolt of the poor” was recognized. More and more was given. Power was slowly concentrating in Washington. Not by design. By necessity. People asked. Laws were passed to give.
Governments now control incredible sums of money (deficits). They are the intermediaries between us and the bondholders. Trillions of dollars go through the capitals of Italy, France, USA, Spain, Greece,….
It is in the lenders’ interest to keep us paying the interest. It is good business practice. But we have to produce the wealth to pay. The alternative is incredible loss of standards of living (which is already happening). Will most of us depend on the government’s largesse?
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 by Timer Digest
To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.
I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.
Disclaimer. No material here constitutes "investment advice" nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
In the last two weeks, yields on 10-year government bonds in the major industrial countries declined.
.png)
.png)
.png)
.png)
.png)
.png)
.png)
.png)
.png)
