Double Dip Recession or Hyperinflation - FED up the Economy


Are Double Deep Recession Fears Unjustified?

Concerning equity I think last few days plunge is a short term bear movement, the reason I believe this is the dominance of negative headlines focusing on fears of a double deep recession. Now don't get me wrong, those fears are justified but if you remove the feelings and the negativity and look at the real numbers you still see positive growth and a new German model surging as an example for the whole euro area.
Is it true that if we do the inflation adjusted growth you can have in some cases negative numbers and I want to underline the point that inflation adjusted growth should be the benchmark but I think this issue of inflation covering GDP growth is going to emerge during the fourth quarter rather than today. We are not yet in this position.
Obviously we are going to collapse the Monetary system with big changes within the world currency hierarchy and a government debt crisis to be handled. But honestly everybody has this debt and currency crash idea on the back of their minds, this is no more secret, the key is to know the timing. I don't think it is the time now for fat fingers to pull the trigger. I think the market is going to go through a last rollercoaster ride before we really crash.

The Fed is acting short term
The Fed extensive quantitative easing cumulated with the Fed basically buying its own debt is feeding the fear sentiment because the the fact and the matter is that they are acting like they were back in the middle of the crisis.
This is a short term move for treasuries and for debt obviously we saw the treasuries outperform the stock market and it may continue within the next few days or weeks but there will be a time when the monetary policy will have to go back to normal with an exit strategy and at this point there will be a huge problem with this debt. The Fed is trapped by its own mistakes and is keeping throwing the boomerang harder and harder but the solutions are only short term. The problem now is that the actual solution is in itself a systemic risk.

Global Growth
Now We have to think globally, the global GDP is going to be positive certainly with emerging markets becoming consumers and not only producers. This is because of three main factors: the first is that they don't have that much of a debt relative to developed countries. The second is related because of they do not have the issues relative to the government debt, they have a certain margin of debt they can still use; they are not thinking about increasing taxes. Whereas in the other hand the developed countries will have to lower their leverage and among the parallel solutions they will have to increase taxes among other things. The direct consequence is a transfer of direct investment from developed to emerging countries where there is basically everything to build. The third is that their currencies, emerging markets currencies are still pretty low which allow them to continue to export.
So in a way I am positive on the overall economy but there is really an issue in regards of a possible hyperinflation in countries like the US. On the other hand Europe and more specifically Germany is trying to limit this effect with the initial idea of having a slow but secure growth by being more rigorous and I believe "the German way" is becoming an example for other EU countries, as a result we have seen an outstanding growth of 2.2% (April-June equivalent to a 9.1% a year!).

To conclude I am positive on the overall stock market but in the case of the us I believe that the upward potential is not necessarily based on growth but rather inflation as I explained on the article the stock market inflation periodicity theory. The other thing I don't say in my article is that developed countries corporations are heavily invested in emerging markets where they obtain a large part of their growth and actually intensifying their foreign operations. So I believe US and European corporations results are going to be excellent but this not necessarily means new jobs in the home countries. that is why we see corporate results above expectations but still record unemployment numbers.

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