deja vu all over again?

Thursday, March 09, 2006 | 07:44 AM

Michael Panzner observes what the macro environment reminds him of:

"Recently, there have been clear signs that the global monetary environment has taken a turn for the worst.

Japan has all but said that it will end its five-year policy of "quantitative easing." [BRdone!] Last week, the European Central Bank raised short-term interest rates and indicated there is likely to be more of the same. And U.S. policymakers have hinted that the light at the end of the tightening tunnel is not yet in sight.

Indeed, St. Louis Federal Reserve Governor William Poole reportedly said yesterday that the central bank may have to raise interest rates "further than expected."

In the past, the transition from a period of excess liquidity to one of tight money has often been accompanied by crises involving shaky enterprises, fragile, far-flung markets, and developing economies. While that relationship has not always seemed causal to contemporary observers, history -- and logic -- suggests  there is a certainly a link between stability and liquidity. A case of "money soothes the soul"?

Given that, one wonders whether the seemingly unrelated political, geopolitical and market-related disturbances that are increasingly erupting in various parts of the world are, in fact, somehow connected. A reflection, perhaps, of the worsening monetary climate. If so, that begs the question of whether we are near  the end of it, or whether these events are like the tiny fissures that open up ahead of major upheaval.

From the continuing stand-off with Iran over its nuclear activities, to the repeated attempts by Nigerian militiants to disrupt oil facilities in that African country, to growing political instability in the Phillipines and Thailand, to the sharp sell-offs in once high-flying markets such as Iceland, Turkey and Russia, to recent weakness in the Mexican peso and Brazilian real, ominous portents abound.

Could this be a case of deja vu all over again?"

Global synchronized rate tightening just as the US economy shows signs of cooling.

Quite intriguing  . . .


Thursday, March 09, 2006 | 07:44 AM | Permalink | Comments (15) | TrackBack (0)
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So what do we do? Cash 75%

Posted by: me | Mar 9, 2006 9:30:11 AM

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