Currencies  |  April 18, 2013 15:02:50

Holy Grail solution to the crisis

Last movements in the market are very interesting and can be even more interesting than the last overflow commodities. We see the decline in stocks from their peaks, while German user actions we have new year's bottom. Padaj bond yields significantly, but not limited to German and French (the new historic lows), but also the peripheral. At least the niekoľkoročné minimum. Revenue Spanish 2-year olds bonds were still at the end of last year at 3%, 2% atakujú now. In Italian movement is similar, from December's 2% we dropped to 1.34%. Dreaded Slovenian bonds? Demand double the offer. What's the problem. This can talk about two matters. Market truly believe eurovalu ECB and that the situation is under control. Or I have to believe, because collecting money from somewhere and share their must insert. A European bond yields are higher or comparable to those of America.For comparison, the U.S. 5-year bonds vynášajú 0.69%. French 0.74%. German 0.31%. That's not enough. Italian? 2.9%. Spanish 3.3%. These countries have recently gotten relief, resp. all on the matter (deficit will be higher). So you will not need to save, lead is a crisis. So the combination ústretovej EU, ECB prepared and good yields makes the peripheral debt relatively good target capital (at least ugly view of the decline in stocks and commodities). A currency risk is lower than the case of an investment abroad.

So it's not about better public finances, ide rather the concerns of investors about its capital and robenie compromises. Regarding the investigation in crisis nowadays has appeared a very nice article which human subjects on us again so much he says. If the snake spochybnenie analysis of Reinhart and Rogoff's 2010, you guessed it.This study showed that the economy, which have over 90% debt to GDP, are growing significantly more slowly. This has become the holy grálom debt-crisis solutions. It should bear in mind the 90% of METU and subdue it all. But it does not work. The reasons are different, especially that the government is its effect nevzdajú just because of some kind of crisis and therefore neprestávajú waste, but dvíhajú taxes. And soul of the economy. People have blbú mood and employers prepúšťajú, since im a crisis situation, except complicates the Labour Code and higher taxes and levies. Whereas the knife but it does not work, should be a reason to find a guilty person. So after three years he has opened Renhartov and Rogoffov excel and it was found that they did a typo. The economy, which have over 90% of debt forgotten reckon Belgium, which provides, relatively successful. So it distorted the data.So everything is perfect, the government can further stimulate and increase its debt is still a little while, because 90% Méta been called into question. Mad? Unfortunately the reality.

There is still a whole world thinks that the economy is like a machine, where the numbers identify exactly what is to do. It is a mistake, the economy is more similar to living organisms that make up the people who are doing mistakes (and sometimes even several times) and of full rationality come from far away. This is why the majority of economic predictions is on the water, because this is often the assumption that tomorrow will be like so yesterday. Nothing better we do, it is necessary to make a view, but it should not be overestimated. Large for research at the historical data are useful preview page for the purpose of understanding of contexts. But even an ordinary person takes a lesson from yesterday that it will affect the future when rozhodovaniach, but that does not mean it will do tomorrow as yesterday.Lenz economic models assume exactly this and it is their weakness. Nevertheless, it is erroneously considered the grail, holy and infallible.

The economy is not that when the debt is 89.9% and is growing nicely and where it is 90.01% and was not growing so fast. The economy is that the larger the debt, the team has a bigger problem in some point it will break because of the interest you will pay is too much and decreases the likelihood that its debts even ever pay. But this is different in different economies and a mathematical model that can not affect, only possible to indicate that a certain threshold is no longer risky. Or is it 80% or 90% is irrelevant. Of course, If we look at this report with a bit of detachment, we find that suddenly, and in the right time anyone has discovered an excuse for governments to increase their debt, because it can be so mind. But it is tosh and debt crisis so only worsen.If your household has debt in volume celoročného your income, and you give 10% of the income only to the interest (which is still installment of principal amount), so you're in debt-tape. A flange is important whether your debt is 90 or 95% of your income? The Japanese knew would speak, as im stimulates growth when have debt at over 100% of GDP (more on analyzing mother of all crises).

So what this says about us? First, you collected by some powerful mathematical model that becomes holy grálom. Then we find that is not as infallible and therefore we find objective reasons why it did not work. And then with modifications blindly carries on. Until again we will not find that something is not working. Then, adjust some small things and continue same direction. On the way to the next error.If we would like analogies, so until now we thought that when on our car (economy) reach a certain burden (debt) and exports by the way uphill stop. And that's correct observation. But now we find that theoretically the vehicle had also withstand greater loads and despite the fact kopcem go up. And ignore that this month is not excluded, but one day, we were the team with exports also nákladom breaks off and begins to pohýnať downhill. And adjust the settings does not help, only zhodenie of Bremen, respectively. its largely. And it will rattle. But we expect that it will happen later, not today. A wiser tomorrow evening, especially when money MINI today.

Crisis is likely still not so strong that we understand that we go towards evil. Still keep in delusion.Instead of reducing debt and derating economy still prežierame the future, because the model showed that, based on historical data, it may be expected that we will grow anyway. Although slower. And when the debt is at 100% of GDP, we find that if we modify the methodology and can not be excluded that we will further grow. And when the debt is at 150%, we find that we need to be rented to interest. And also you may find that none nepožičia us. Hm. So Raise taxes and stimulating so that we can grow and lend to and stimulate and grow and grow in. .. to infinity. Such reasoning ill probably change requires thinking, probably more shock than we have seen so far. Probably we will have to show the Japanese that path does not lead tadiaľto. Hopefully, it will be as soon as possible.

In the market we see a rally of risk assets, yesterday reached the bottom of the first U.S. stocks (čiernym), consequently, euro (blue) and then came the onslaught of the gold that was skúpený. So we see a cautious bounce up. In particular, a pending or precious metals after defending his suportov begin a larger correction declines, or we medzizastávke only on the decline. Next day show which option is correct. The market for precious metals (gold bullion least) but now looks a lot better than a month ago.

Author: Tomáš Swimmer | TRIM Broker, as | trading on the stock exchanges TRIM Broker

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