Micky D's is where you find the cheapest food on the planet. As the crisis erupted many luxurious restaurants lost customers to mighty Micky D. This led to a surge in McDonald stock to rise, which meant consumers were cautious about their money. See the chart above has been on upward trend ever since 2007. If the share price keeps rising or stays where it is and crank out dividends, even when the overall market is deteriorating it is telling us that the economy is still crumbling as consumers consume the dollar menu and cut back on spending.
There are several ways to find out if the economy is making a comeback. When Japan Inc. fell into a depression some 20 years ago its central bank cut interest rates to zero! Yes, that is a zero, money was free. It still is free, as the central bank keeps fighting a losing battle. You probably have heard the term carry trade, it became so popular when Japanese wives stopped working and started making a killing by borrowing the local currency (Yen) close to 0% interest rate and invest it somewhere that earned them a nice yield. That party along with global boom music ended in 2007. I don't think I need to tell you what happened in 2007, but something neither the Japanese wives nor the crowd expected happened. The world crumbled to ground zero by introducing zero interest rate policy aka (ZIRP). I wonder what the Japanese wives are doing these days. Hmmm... who cares!
The Federal Reserve of the United States adapted the ZIRP policy followed by Bank of England and many other central banks around the globe to pump liquidity. So far the only central bank that has raised interest rates aggressively among the G-20 is Australia. Thanks to the middle kingdom's (China) appetite for natural resources Australia's economy was on fire. In order to cool it down the central bank raised its interest rate to 4.5% recently being the highest in the industrialized nations. Just like Japan responded by cutting rates to fight deflation in the late 80's till today, the Federal Reserve of the U.S led by Ben Bernanke responded in the same manner, fearing a depression, by cutting rates close to zero. After the bubble burst in 2007 deflation became the threat and paralyzed the system by cutting off credit. Therefore the fed cut rates to make sure credit was flowing so that the world economy wouldn't face a catastrophic doom. So if the Feds did cut rates as the economy soured, what do you think they ought to do when it is sweet? Untill then the brain washers, the masters, economists, Harvard professors, Timothy Giethner, Larry Summers and so on can try to make us feel better with their cheap talk.
There are several ways to find out if the economy is making a comeback. When Japan Inc. fell into a depression some 20 years ago its central bank cut interest rates to zero! Yes, that is a zero, money was free. It still is free, as the central bank keeps fighting a losing battle. You probably have heard the term carry trade, it became so popular when Japanese wives stopped working and started making a killing by borrowing the local currency (Yen) close to 0% interest rate and invest it somewhere that earned them a nice yield. That party along with global boom music ended in 2007. I don't think I need to tell you what happened in 2007, but something neither the Japanese wives nor the crowd expected happened. The world crumbled to ground zero by introducing zero interest rate policy aka (ZIRP). I wonder what the Japanese wives are doing these days. Hmmm... who cares!
The Federal Reserve of the United States adapted the ZIRP policy followed by Bank of England and many other central banks around the globe to pump liquidity. So far the only central bank that has raised interest rates aggressively among the G-20 is Australia. Thanks to the middle kingdom's (China) appetite for natural resources Australia's economy was on fire. In order to cool it down the central bank raised its interest rate to 4.5% recently being the highest in the industrialized nations. Just like Japan responded by cutting rates to fight deflation in the late 80's till today, the Federal Reserve of the U.S led by Ben Bernanke responded in the same manner, fearing a depression, by cutting rates close to zero. After the bubble burst in 2007 deflation became the threat and paralyzed the system by cutting off credit. Therefore the fed cut rates to make sure credit was flowing so that the world economy wouldn't face a catastrophic doom. So if the Feds did cut rates as the economy soured, what do you think they ought to do when it is sweet? Untill then the brain washers, the masters, economists, Harvard professors, Timothy Giethner, Larry Summers and so on can try to make us feel better with their cheap talk.
Regards,
Eskinder Haile
Hi Eskinder! How are you? I have read Your articke. It was very pleasant to me. Here in Ukraine thay say: "A good beginning half of success!". I am proud of you.
ReplyDeleteYour uncle, Tsegaye.