"
All the signs are right this time
You don’t have to try so very hard
If you live in this world
You’re feeling the change of the guard”
- Steely Dan
Since we hung up our bond trading shoes in 2006 we have invested with a deeply contrarian macroeconomic view: irreconcilable debt would force the current global monetary system, formally in place since 1973, to fail. Those that followed our logic and investment rationale have inevitably asked one question: “when?” We have shied away from answering because monetary systems are inherently political arrangements staunchly defended by powerful institutions. Official responses to deteriorating fundamentals can be enormously powerful, especially when ever more monetary easing, fiscal gimmicks and political suasion are foisted upon a marketplace conditioned to accept the established medium in exchange for goods, service and assets.
While we would be foolish to invest under the assumption that we know exactly when the long-term becomes the short term, (or even when it becomes the now), we are confident the global economy is much further down the timeline than just a year ago to rampant hyperinflation and/or a formally-structured monetary devaluation. The Greek bailout and the US debt ceiling impasse are merely different publicly visible manifestations of the same problem: there can be no political solution for extinguishing debt other than formal currency devaluation via asset monetization that would collateralize systemic debt.
The collision between the fraying establishment supported by “reasonable” centrist policy makers and the ulterior natural incentives of the global marketplace is upon us. Public and private sector debt is irreconcilable across all major established economies without more money manufactured to repay it, a process that diminishes the value of currencies and savings. Current events confirm that anticipating a-cyclical economic change is the prudent course for investors regardless of one’s preferred investment horizon..."
at http://www.ritholtz.com/blog/2011/08/change-we-can-believe-in-new/
All the signs are right this time
You don’t have to try so very hard
If you live in this world
You’re feeling the change of the guard”
- Steely Dan
Since we hung up our bond trading shoes in 2006 we have invested with a deeply contrarian macroeconomic view: irreconcilable debt would force the current global monetary system, formally in place since 1973, to fail. Those that followed our logic and investment rationale have inevitably asked one question: “when?” We have shied away from answering because monetary systems are inherently political arrangements staunchly defended by powerful institutions. Official responses to deteriorating fundamentals can be enormously powerful, especially when ever more monetary easing, fiscal gimmicks and political suasion are foisted upon a marketplace conditioned to accept the established medium in exchange for goods, service and assets.
While we would be foolish to invest under the assumption that we know exactly when the long-term becomes the short term, (or even when it becomes the now), we are confident the global economy is much further down the timeline than just a year ago to rampant hyperinflation and/or a formally-structured monetary devaluation. The Greek bailout and the US debt ceiling impasse are merely different publicly visible manifestations of the same problem: there can be no political solution for extinguishing debt other than formal currency devaluation via asset monetization that would collateralize systemic debt.
The collision between the fraying establishment supported by “reasonable” centrist policy makers and the ulterior natural incentives of the global marketplace is upon us. Public and private sector debt is irreconcilable across all major established economies without more money manufactured to repay it, a process that diminishes the value of currencies and savings. Current events confirm that anticipating a-cyclical economic change is the prudent course for investors regardless of one’s preferred investment horizon..."
at http://www.ritholtz.com/blog/2011/08/change-we-can-believe-in-new/
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