Friday, March 20, 2015

It's The Central Bankers' World, We Just Live In It

A 1-year chart of the Nikkei (Japan) and the DAX (Germany).
It would be hard to find two first-world countries going in such different directions as Germany and Japan. Germany has relatively low debt and decent prospects. Japan is a currency crisis waiting to happen and a demographic basket case. Thanks to crazed money printing at their central banks, their stock markets are marching ever upwards, almost in lockstep.

Over at the perpetually gloomy Zerohedge, there's this post with this tidbit.
"This is not investing," exclaims Ed Yardeni in this brief clip, "it is all about central bankers... these markets are all rigged." That is not a criticism he notes, "I just say that factually... I love these central bankers, they've been very good to the stock market."
I don't think I'd use the term "rigged" as I see this as more of an unintended consequence of progressive social spending. With debts as high as we've got - Japan (gross debt is 238% of GDP), US (107%), Germany (82%), central banks have no choice but to keep interest rates low by printing money. If interest rates were at historic norms, our governments would go bankrupt trying to make the payments on our loans.

All that money has to go somewhere and since there's no point in building factories or even digging oil wells these days, it goes into the stock markets. Investors get richer, but jobs aren't created. The fabled 1% make out like bandits and the 99% go wanting, except for what happens to their 401(k) plans.

Oh well. At least we all get that temporary glow from feeling compassionate as we vote for more and more government handouts funded by borrowed money. In the meantime, stock markets around the world all rise together.

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