James Lewis

The King Canute Economy: Governments' Futile Attempt to Stem the Tide

this is a very good article...
can the masters of the universe hold back the tides indeed.

of coruse as negative as all this is, if the OECD countries can generate enrgey using clean technology and take away flows of USD to the oil countries. Then we could see a re-emergence of wealth back to the west. Also if the west shuts off imports into their markets, more domestic manufacturing could fuel added value in the western economies.

The point here is that the USA has more faith in making money in the Chinese market and by doing so become closer to China. Then to block off chinese exports and make them in their own country.

I agree that the asset bubbles created a veil of untruth and hid the underlying weaknesses of the west economies but be clear these asset bubbles were financed by the east as well. So in effect the east paid a great deal towards this fake wealth. Also the IT and technology revolution did add a great deal of real value to the western economies.

Innovation and technological advancement adds so much to an economy. More than economists can ever believe. This is why R+D pays off. The USA strategy of getting low value added goods madeinthe East while spending its time/money on R+D may pay off.

From where the US is standing I belive they know they have to create real value added to their economy. So I do not think their arrogance is blinding them. They better hurry up and they better hope they can generate 2-3 trillion/year from clean energy. If they create enough money through QE and hyperinflate the money supply by 100-150%. Then in 2020 they may be able to wipe out all their debt.

U.K. Gilts Could Be World's Best Short

Clive comments are very interesting. If we were to join the Euro, then we would first need to bring interest rates in line with europes and peg our currency on 1pound-1 euro. Therefore this suggests slight weakening of the pound. So owning Gilts if you are an interntional investor may be a bad idea because of currency risk.

Of course the pound joining the euro is a very big step as we are essentially a monarchy. The pound with the queens head on it is the only real thing we have left from the days when we ruled the world through the British Empire. Of course with the Labour Government owning most of the banking system - we could join the Euro if things got really bad this side of the water. And Europe pushed forward. However I am not sure if this is the case, after all Spain and Italy are in such terrible state they may want to pull out of the Euro.

In terms of who will buy our debt. I urge readers to remember that that the FED was essentially an offshore UK banking network. The USA will (if they can) step up and buy our debt. But there will need to be some interest rate rises. But not the amount everyone is predicting. And maybe this will not strengthen sterling because of the state of the UK economy and the very obvious need to devalue the currency through QE.

As crazy as this may sound to everyone, my feeling is that the UK is in such deep trouble. That any attempts to restriant the QE program through concepts as 'rsponsible money supply control etc' will be very damaging. We need to print as much money as we can through QE as quickly as we can. We need to devalue our currency by 25% from where it is now. And we need to subsidise manufacturing so we can build a manufacturing industry on the back of weak sterling. We need to reduce un-employment benefits and have those that want to be unemployed working in low skill factories for a few days per week to get their money.

On top of this we need to inact vary favourable incentives for rich people to come to UK from other countries. Further to this we need to subsidise living costs by taking away greedy private companies making money on the back of running our country (utility companies etc) and by definition drive down wages.

This is a very tall order, I guess that not even 5% of the above will be done. Therefore expect a year of growth before the s*h*t really hits the fan. The UK is in a very bad place

Global Returns: Stocks Down, Bonds Down

Trading Russia/Brazil is the same as trading commodities.
If commodities carry on their rise or stabilise then Brussia is the way foreward. You start getting a drop in oil etc, then China is the market to be in.

Shortly we will start to see PE ratios in the region of 13-15 in some stocks in China. That suggest that China will improve its dismal performace, we just need the market to capitluate.