Jubilee Prosperity

Masters of the corporate universe in The City or on Wall Street may still get benefits, bonuses and golden parachutes for a while, even after they gambled away the rent money. This is changing.

3.5% GDP may be unsustainable because consumers, more than two thirds of the economy, are still underemployed and sitting this one out except for essentials. It’s jobs silly.

Know anyone who got a 3.5% raise?

Another reason we may be unlikely to see hyperinflation anytime soon. G-20 industrialized nations with well-developed capital markets raise interest and return rates to compensate for the risk of inflation shocks. Markets do this by lowering the prices of bonds, real estate and stocks for better returns. The real estate market is the slowest of the three to adjust. Change it will as night follows day.

Fed and Treasury can manipulate rates lower for a time. Capital markets are larger than they are and really call the shots. The orchestra gets ahead of the conductor.

When Fed and Treasury see gold going to $1092 or higher, they know they must put their feet on the brake after winning a battle, or lose the war.

So then can we expect business as usual with inflation?

Maybe not this time.

The wonderful thing about market prices, returns and yields is they go up and down to relieve financial stress and find the best return. Revolutionary era Brit Adam Smith called it the invisible hand of the market. Moravian political economist Joseph Schumpeter called it waves of creative destruction. In other words, good businessmen and investors make and keep money, while poor ones lose it and people buy them out for scrap.

There are cycles of economic creation and destruction that go back before ancient Biblical times in Leviticus and Numbers.

The Sabbath is a cycle of seven days, weeks, months, years or decades that describes seasons for sowing, growing, reaping, and resting.

Agricultural cycles became economic financial investment cycles of borrowing, investing, saving, and forgiving.

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This entry was posted on Wednesday, November 4th, 2009 at 2:49 pm and is filed under Market Psychology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.