Meanwhile oil producing nations, particularly the Saudi Sand and Oil Kingdom, are fixing to stop pricing oil in dollars, and replace it with the average of a "basket of currencies." Which means that if you thing three bucks a gallon is high, get ready for $5 or even $6 or more.
But wait, you say, none of these worries make sense. Look at the stock market. The equities markets have boomed in recent months, edging to within snorting distance of 10,000 on the DOW.
I wish I could get all giddy about that, but the driver behind that has nothing to do with anything real, or anything helpful.
Over the past decade or so of laissez-faire global finance those who create value in the equities markets figured out how to profit even more without actually creating actual value. It's been a period of fiscal alchemy in which they turned, not lead, but hot air, into gold -- at least for them.
Here's the problem in a nutshell:
Over the last couple of decades or so, the book value of assets -- stocks, bonds and bank deposits -- exploded. They now represent four times the actual annual global gross domestic product.
The Mckinsey Global Institute estimates this trend peaked sometime in 2007 at $194 trillion -- compared to much more grounded and realistic levels such as $43 trillion in 1990 or the $94 trillion in 2000.
Which says to me that at least $100 trillion that's been added to the world's books since 2000 was largely if not entirely, hot air.
That hot air funded the last three bubbles.. the dotcom bubble, the housing bubble and the securities bubble. And it's that $100 trillion in hot air, in search of the next bubble, that's driving the equities and commodities markets upward.
"It's not a matter of could it happen again; it's a matter of when," says Kenneth Rogoff, an economics professor at Harvard University and co-author of a book on bubbles, "This Time Is Different: Eight Centuries of Financial Folly."
All of which, when taken together, has me deeply and profoundly worried. On one side we have a small group of individuals, companies and national and extra-national institutions trying to leverage that $100 trillion in hot air on their books into another few trillion in hot air -- on which of course they pocket very real returns in trading fees, capital gains and Soprano Family-type relationships with others of their kind. Because, after all, "their thing" has served them very well indeed.
On the other hand we have entire nations across the globe, not third world nations, but developed nations, flat broke, rattling their tin cups at one another while living in terror that no one will lend them any more money -- and at the same time worrying that those who owe them money will devalue their currencies thereby rendering them even more fiscally screwed than they were already.
Back here in the US of A that tin cup has become a yawning 55-gallon barrel, as we need to borrow more and more to fill the holes left in our own institutions when those Soprano financiers pulled the plug on their Ponzi schemes. Just this morning we learned that even after bailing out Freddie and Fannie and AIG and BofA and ". that now we are going to have to borrow a few more billions to bail out the FHA as well. (Oh, and then there's those two expensive wars someone believes we need to continue funding as well.)
It would be one thing if what we're going through right now was just the collapse of the US financial system. But it's not. This time it's anyone who is anyone in the developed world -- from the G8 right up to the G20.
Those Soprano Financiers were great lovers. They found the world's G-spot.
Now we've all got the clap -- or likely worse.
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