www.spyns.com
 |
| Map of Japan's 2011 earthquake and resulting tsunami. |
Moving on from the 2011 Tour de France, I wanted to blog briefly about this latest trend of minimizing or at least blue skying everything. After listening to 2 solid years of "it's getting better" from politicians commenting on the economy, I wonder when we’re going to have our Churchill moment. For those who study the history of the 2nd world war, Chamberlain was prime minister before Churchill. He famously negotiated a peace settlement with Hitler and waving a letter signed by the Fuhrer boasted about "peace in our time" just before the outbreak of hostilities. While we are currently not at war, at least outside of the Middle East, recent developments suggest that things are getting a lot worse. What we currently lack is a leader who is going to tell us the truth as Churchill did in 1939.
This dawned on me while watching CNN coverage of the nuclear disaster in Japan. The story went something along the lines of "Japanese authorities say they have significantly reduced the risk of nuclear meltdown". Unfortunately while this was being read by the commentator, live coverage showed the lid being blown off of a reactor. Clearly this was not a controlled explosion and as we've seen in recent days the Japanese are looking at a Chernobyl style meltdown. The same thing could be said about the financial markets .
I have watched with interest as stock markets continued to climb despite rather shaky fundamentals. There has been a rather brutal correction in the aftermath of the Japanese earthquake, but my feeling is markets will continue to trend downward. After almost 24 months of stock markets reacting to not so bad news as if it were positive news, I believe the period of "the Emperor has no clothes" is ending. When you think about it, there really isn't that much of a difference between 2008 and now. Banks remain highly leveraged, consumers are deeply in debt, trade deficits with China are growing, the housing market is collapsing, and in a new development most Western governments have piled on debt to support anaemic economic growth. Strange how it took a natural disaster like an earthquake to shake people to their senses.
While my thoughts go out to everyone suffering in Japan at the moment, I would find it very hard to believe that the Bank of Japan is currently buying US treasuries and other forms of debt from developed countries. The Japanese are by far one of the largest buyers of international debt and particularly American debt. With a major purchaser now out of action perhaps indefinitely, fewer buyers will likely mean higher interest rates and that's not a good thing for debt markets. While the United States has the backstop of the U.S. Treasury buying its own debt via quantitative easing, Europe does not have the same type of mechanism. This is bad news for little Portugal so I would expect to see a bailout for that country in the next month or so.
There are three other factors that may derail the worldwide "recovery": Middle East unrest; an oil shock; and the US budget conundrum. Again we're seeing politicians downplay the effects of expensive oil, virtual civil war in the Middle East, and the apparent inability of the U.S. Congress to reach some form of compromise on the federal budget. Any one of these factors alone is capable of sending the world into a tailspin, at least financially speaking, but now all three are happening simultaneously. Something has to give eventually.
Spyns is an active travel company based in Whister, BC (Canada) and Beaujolais France. Spyns specializes in 2011 Tour de France packages for both riders and non-riders. We specialize in providing clients with Tour de France bike and non-biking packages with Paris grandstand seats and VIP access. Spyns offers active holidays to Europe including trips to the 2011 Tour de France. For more information about Spyns 2011 Tour de France tours, please go to http://www.tdf-tours.com/ or http://www.spyns.com/. You can also call us toll-free at 1.888.825.4720.
