Face it. Very few of us really understand the current state of world finance. It’s not just that the world is lurching from crisis to crisis, but also that the markets are so complicated, the policy questions so thorny, the obfuscation so thick, that we are all having trouble getting a handle on something that is redefining our reality.
When things look murkiest, when the way seems unclear, it is good to have a responsible and reliable guide to lead the way. Didn’t Dante enlist Virgil to guide him through the Inferno?
We are not great poets so we do not need to limit ourselves to a single guide. However many we choose, I would nominate legendary investor Jim Rogers as one of them. I don’t think that he needs an introduction; his fame precedes him.
Last night I watched Rogers being interviewed by Chrystia Freeland of Thomson Reuters. The video had been linked on Prieur du Plessis’s blog, Investment Postcards. Link here.
As always, Rogers has an exceptionally clear take on what is going on in the world today. Even if it only shines a little light on the darkness around us, I think that it is well worth your time. It was certainly worth mine.
Well, if you want a brief explanation of some aspects of the financial mess...
ReplyDelete1) The expansion of the economy for the past several years has been based on fraud. Basically, everyone of any importance in the housing fiasco lied about just about everything that matters. Since fraud is directly counter to actual reality, this is causing major problems like any other historical mass delusion. Bush and Obama have decided to solve the problem by bailing out the people who perpetrated the fraud. This is making people angry.
2) The industrial/post-industrial world has too much soverign debt. This is eventually going to cause a major fiasco that will make 2008 look like a walk in the park. No one really knows whether Japan, the U.S., or the EU is going up in flames first, but someone's soverign debt is going to die and go to soverign debt heaven.
3) Bernake is not really helping much at all. He's a mixture of cluless and delusional. He's currently involved in a naturalistic experiment of some kind that, like Greenspan, will result in another major crisis, which could be related to #2 or could be a completely separate mess. Basically because that's what the Fed has done since Greenspan took over. If you a good description of what is happening in Fed-land, you can read Jeremy Grantham's "Night of the Living Fed" over at www.gmo.com.
Thanks, JP, for an excellent concise summary of what went wrong in the world financial system.
ReplyDeleteAnd a special thanks for bring the Jeremy Grantham article to our attention. Grantham is certainly one of the best guides through the miasma.