There goes another election that was accurately predicted by the prediction markets.
I wandered down to ‘Election Central’ with a few thousand other people. The shouting match got extremely loud and I was right in the middle watching in dazed bewilderment. I was surprised that about 50% of the attendees were under the age of 30. The demographics and voting preferences are rapidly altering the political landscape and soon there will be valleys where there were mountains. Change is coming.
Meet the new boss who is the same as the old boss. The new Treasury Secretary’s pedigree will be interesting; Goldman, JP Morgan? The more things change the more things stay the same.
Interest rates are declining but lending is not happening so the velocity of money is in sharp decline causing the slowing of economic activity. The profits of major corporations are under pressure which lowers Federal tax revenues. This will cause an exponential increase in the budget deficit.
The $500B in short-term Treasuries recently auctioned were quickly gobbled up in this flight to safety and liquidity although LIBOR stresses have eased slightly but still remain strained. These events are extremely bearish for the dollar long-term so the 30 year is losing out to shorter term instruments.
Likewise the oil contracts that are out a few years are trading a significant premiums to current prices. Gold will follow suit as the dollar continues its decline from rotten fundamentals. A COMEX failure, there is pressure being put on the December delivery, would change the worldwide gold price detriment.
A Bloomberg article contained a paragraph which expresses sentiment nearly perfectly. “No one wants to lend because they are still wary of values of bank balance sheets, and no one wants to borrow from the money market because they can borrow directly from the central banks,'' said Alessandro Tentori, a fixed-income strategist at BNP Paribas SA in London.
The new Overlord has been revving up the engines of big government. This will further sap the wealth of the world and enervate its economy.
The continued nationalization of the private sector will only exacerbate the economic problems. Perhaps this new generation, which will be the largest in history and outnumber the Baby Boomers by over 30% in the 2016 election, is going have a sour taste in their mouth from socialism and big government.