Friday, 24 October 2008

Friday Morning

Stock markets slumped across Asia overnight, money markets showed signs of rising on concerns that other countries are about to go the way of Iceland and Argentina. The Euro and Pound Sterling continue their plunge. Oil continues its fall despite the noises coming from OPEC and evidence that production cuts have already taken place. Gold continues to lose. US Treasuries are the clear winners, with the entire world wanting to buy US Government debt. There is fresh speculation that the world's financial markets are in dire trouble. The volatility index 'VIX' is still at an all-time high indicating that fear is still at record levels.

While typing this blog, I was listening to a live interview on Bloomberg with a European banker who said that nobody had ever seen anything like this present situation and was recommending investing in gold "as a hedge despite the recent falls".

With the huge losses on the world's bourses and today's futures for the EU and US looking like the abyss, I wonder whether they might need to suspend stock markets for a while. This flight to the 'safety' of US Government debt is highly dubious; as I have discussed recently, the huge injection of US Dollars into the system is set to devalue the US Dollar. We are living through a financial tsunami and it is not possible to make much sense of the daily movements; we need to try to look at the big picture, hence the name of this blog "davidscompass". To survive this financial crises we need to take a view on the conditions that will exist when we come out of this mess. I can see no alternative to hyper-inflation, potentially of Wiemar proportions.

------- STOP PRESS -------

Denmark raises interest rates to boost Krone. This was unexpected.

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