Deteriorating Confidence Makes Governments Insolvent

The inability of governments to pay their obligations in constant dollars, also recognized as inflation by the public and ongoing default by capital, has been occurring since 1934. It certainly intensified in 1971. The secular gold trend suggests that 1971 was simply the dress rehearsal for a bigger show taking place right now. As a side note, the association of hyperinflation with lower stock price under the fiat currency model is not historically consistent.

Headline: Hidden Debt Makes Governments Insolvent: Bear

As we prepare for the two-year anniversary of the March 9 lows for stock markets, investors are confronted with a number of worries that make it difficult to celebrate the near 100 percent jump in equities since then.

Oil prices are soaring off the back of unrest in the Middle East, there is talk of rate hikes from European Central Bank President Jean-Claude Trichet and unemployment remains stubbornly high despite some better news from the US on Friday.

On top of these, a mountain of debt is growing but because it is off governments’ balance sheets it has been so far ignored, one man who worries perhaps more than most, Albert Edwards from the global strategy team at Societe Generale, said.

One of the world’s most famous bears, Edwards is adamant the global economy and financial markets are not in a good place.


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