|
In this article, Sean Corrigan, Chief Investment Strategist, Diapason Commodities Management (sean.corrigan@diapason-cm.com) takes a macro look at the markets.
A year or two ago, when journalists first started bandying the word “stagflation” around, the term was – as with so many in the modern world – applied only in the very loosest sense, namely, that the published GDP numbers had started to show a higher deflator component than they did a ‘real’ growth one.
Not only was this a fairly meaningless combination of data, but the interpretation of it entirely missed the mark for the overall situation was far removed from the horrors of the 1970s when the term “stagflation” was coined.
Back then – to the lasting chagrin of the Keynesians who had reckoned this an economic impossibility – prices were rising rapidly, even as unemployment was simultaneously mounting in many Western nations.
As part of an article dealing with this misconception, back in 2004, I produced a schematic graph entitled “In Alan Greenspan’s Wildest Dreams”.
What this showed was a scenario where interest rates were rising steadily through time, but where the masses – through a combination of job gains and higher wages – were keeping ahead of any rise in debt service costs. Hence there would be no defaults and no reason for banks to tighten credit standards.
With corporate revenues – and hence profits – then drawn so as to stay ahead of the wa...................... To view our full article Click here
|
RSS
