Thursday, April 5, 2012

OMG! Another crisis

Well here we are with another "crisis" looming. For the last couple days CNBC ("the first in business news") has been warning of another crisis coming in Spain! OMFG!
Seriously, there may be some merit to their warning. But I have to wonder why there will be a world economic crisis due to something that has been on the radar for at least 2 years. Ireland and Italy and Spain and of course Greece have been a topic of conversation for what seems like forever. I don't think that the BIG money has been asleep during the last few years and so I doubt that a crisis in Spain will take anybody by surprise. The world is wary of risk and should be in light of the events of the last few years.
For these reasons I doubt that there is much risk of a systemic crisis due to the debt in Spain. There may be some banks somewhere looking for some more free money from the taxpayers but I doubt a credit event.
Of course after the rest of the world works it's way through their problems then it will be our turn. But that is a political debate that I won't get into now!

The risk trade in gold continues to unwind so gold is down over the last weeks.....
The FED minutes yesterday gave a signal of higher interest rates, or at least a lessening of the push to keep interest rates low. So bonds should go down to a "normal" level. And if money is coming out of bonds it has to go somewhere and the other broad categories are cash and equities. ???
Iran and oil is still "out there". The news mentioned an insurance company that will no longer insure ships carrying Iranian oil.....

But I continue to think that the underlying support for the U.S. and world economies will be the increased availability of natural gas. NG is a cornucopia of cheap energy that will be exploited over time. And energy is the basic input to a modern economy. Energy is the source of wealth and prosperity. And a sustainable relatively low cost of energy will translate into increased availability of money through lending and credit which will feed through the economy and cause a general rise in the velocity of money as people get about doing something. As mentioned in an earlier post, consumer sentiment continues to be on the rise despite all the bad news and that is a very positive sign. Cheap energy fuels consumption so basic materials should see some demand even if it is less costly to mine.

For now.......

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