T Nation

Pink Elephant in the Room...


Funny. Gold, stocks, currencies, silver, etc. are discussed at length here all the time, yet we have just finished a week when the DJIA is down almost 900 points, gold has fallen almost $200, and the dollar has taken off and you can almost hear the crickets in PWI.

What gives?

I have a theory. I believe the realities of the current financial situation in Europe and the US is finally becoming so obvious as not to be able to ignore. People are getting scared, and it is almost as if they can ignore the consequences if they chose not to acknowledge it. Kind of like whistling past the grave yard.

Does any of this make sense or am I just being Henny Penny?


I think the elephant in the room is recession. And that this is no double dip but an extension of the same recession. I think in hind sight, the stimulus made it look like the recession had passed but in reality it was a crutch and it's over. So we are right back to where we started from. If you look at the Great Depression the pattern was similar but on a smaller scale. The government would dump money in to something, you'd get a blip and when the money ran out, we were right back where we started.
I think we can classify this period as a depression. It's been going on long enough now.
The problem behind the Keynesian methodology is it doesn't work, and has never worked and will never work. It's just an absurd methodology that works in theory only, kind of like communism. The reason why it will never work is the actual amount of money it would take to work simply doesn't exist. If the government could somehow magically dump about 3.5 to 4 trillion dollars into the economy at one time, it would stop the recession instantly and be sustained. But it would take that much and nobody has that much. Trying to sorta kinda follow the methodology with much less than it takes to make it work just makes something happen that does not work.
If you eat from a trough you know will soon be empty, you'll stuff your face as much as you can because you know your going to be hungry again. If you know your going to be hungry again, you have no confidence.
So it was with the stimulus, it threw a little money around, but nobody had any confidence in it. The economy lives and dies on confidence.


A major problem (I think) is that 70% of trading is now automated microtrading. The market is fundamentally different because of that. Another problem is that the market now responds to DAILY news of all sorts. It wasn't meant to do that.


I agree, but I have no idea what to do about that....