Mar

13

According to an article in Bloomberg today the sad and dramatic events in Japan should not stop the bull market. "Global Stock Rally May Withstand Japan Disaster". "Investors said that barring a nuclear disaster, the country’s worst earthquake on record is unlikely to halt the two-year bull market in global equities". You would think that it is because of the resilience of the global economy….

Here is the "real" reason: "Bank of Japan Governor told reporters he’s ready to unleash “massive” liquidity starting this morning in Tokyo to assure financial stability". And a fund manager said:"The purely economic consequences will be modest: some reconstruction, some more government spending".

Since the 2008 crisis it has become prevalent the idea that government spending is the holy grail of economies. You have a problem ? Pump liquidity and it will go away…. You do not grow fast enough? Just plan to increase your deficit and that's it….

How can they be wrong when the stock market doubled in 2 years? But when will we wake up from this dream….(or nightmare?).

Alex Castaldo adds:

Here is the latest news headline:

8:20 BN *BOJ ADDS 7 TRILLION YEN TO SYSTEM IN EMERGENCY OPERATION

That is US$85.5 billion.


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  1. Alec Misra on March 15, 2011 12:57 pm

    I dont mean to be rude Paulo but you do not understand economics. Japan faces severe deflationary pressures in the wake of the quake, just as the US did in the wake of the financial crisis. The Yen is appreciating dramatically to confirm this. The logical solution to counter this crisis is to print more yen until the economy stabilizes. Its simply true.

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