" A Precarious State" (some interesting economic observations)

[ret5hd]

(From ret5hd: I am not familiar with this author, I just stumbled across this. If anyone is familiar with him, feel free to enlighten us.)

http://www.oftwominds.com/blogjuly16/precarious7-16.html

That the global economy is in a precarious state seems self-evident. Take your pick of the systemic risks: debt bubble and slowdown in China, banking/political crisis in Europe, negative interest rates and stagnation in Japan, ongoing meltdown in emerging markets and currencies, oil prices that threaten mayhem if they go up and if they go down, and a downturn in global trade that is usually associated with recession.

If the global financial sector isn't precarious, then why is capital flooding into negative interest bonds? Why are money managers willing to accept a guaranteed loss of capital if things are going great and opportunities for low-risk profits are abundant?

The political realm is also in a precarious state. No matter how you interpret Brexit--as a Kabuki play by Deep State insiders, as a political ploy that went off the rails, as an ugly outburst of xenophobia, as a rebellion of the Forgotten Class that lost out in the Great Financialization boom, as a resurgence of nationalism--whatever interpretation or combination of factors you favor, the net result is the same: Brexit reflects a precarious state of shifting political tectonics that threatens the status quo.

If the global banking sector isn't precarious, then why are bank stocks tanking? If these banks are minting profits and accumulating well-collateralized capital, why are investors selling them?

[bhikkhu]

1. Bank stocks are low because interest rates are low

interest rates are low because global economic growth is low. Economic growth is low because...well, there isn't a real consensus there.

Personally I think we live on a finite planet, and there is a limit to growth. We have falling birthrates in all continents but Africa (and that is a long overdue good thing), leading to a demographic shift toward an older and retired populations, leading to less available labor and less of what you might call "competitive consumption". At some point, again pointing out the finite planet we live on, the goal should be a finite economy - stable rather than growing. I don't know of any economist that has swallowed that pill.