Tuesday, January 12, 2016

Supply Side Blowback

Decades of declining interest rates and manipulation of interest rates with the intent to stimulate production has resulted in overproduction. This is not more apparent than in energy production. Technologic advances enabled by easy money has resulted in over supply. This has occurred as the traditional oil producers became dependent on oil revenue to sustain their economies. The people in these countries are accustomed to high living standards and accustomed to not paying taxes to support those standards. This leaves the governments of oil producing countries with a cash crunch. What better place to get some cash than by using savings. And many exporting countries have large investments in stocks and bonds around the world. Countries, like many individuals with extra money, don't just save, they invest. Stocks and bonds are the savings of the world. What happens when we cash in the savings. This at a time when a large cohort in the western world is approaching retirement and any retirement "savings" are in stocks and bonds......

Sovereign Wealth Fund Institute

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