As promised this morning, a short piece on why I dont like these auto bailouts (or any other non bank-essential one for that matter)
Bailouts = Subsidies = Protectionism = Competitive devaluations. All in the name of getting domestic demand going again.
Competitive devaluations in this environments means a HUGE risk for the global GDP.
Competitive devaluations would mean a lot less coordination globally. It would most likely mean the global monetary base expanding at an even faster pace as monetary policy would be used as a means of increasing the domestic liquidity base even faster as well as lowering the value of the currency.
The worst country example would of course be China. Lets just hope they dont drastically lower the value of their currency. We dont need them as a global deflation machine at this point in time.
What do I suggest?
Use this opportunity to speed up restrucuring processes that would have taken place over time anyway. This represents a unique opportunity to save time and money in that very process. Take it. Activate infrastructure projects that were planned over a longer time span and implement them over a shorter time span instead. There should be auto labour being able to transfer straight into the infrastructure projects. Other fiscal stimulus measures to be added as well to soften the transaction process.
BUT, as mentioned earlier, markets dont care about this dilemma, for now.
So lets not concern ourselves with it, not for the next few days anyway, and hopefully, few weeks.
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment