Original link in Russian Decline in economic indices - the result of disastrous economic policies
After a serious fall in the U.S. stock indices last week in the media numerous articles have appeared. The main reason for the incident authors believe investors' fears that the improvement in the labor market will lead to a tightening of monetary policy and cuts in programs QE. Let me disagree with these explanations.
We should not delude ourselves unnecessarily reduce the initial claims for unemployment benefits to 320,000. In assessing this indicator should take into account seasonal factors. Summer period is characterized by the appearance of many temporary jobs in the service sector, which are associated with the holiday season. By the autumn of these jobs will be cut. In addition, many Americans postpone summer for fall job search. I think that in September, the number of applications for unemployment benefits will increase significantly.
For some reason not go unnoticed by the authors of articles data on net purchases of U.S. securities by foreign investors (Net Long-term TIC Flows). These data were in the negative area. In this case, the speaker is very important. Data on this indicator are in the negative sector for the fourth month in a row. If the March deficit was -13.5 bn in April -21.8, -27.2 in May, and in June reached -66.9. There is enough stable growth dynamics deficit.
From the above statistics should be very bleak for the U.S. economy conclusion. Foreign investors refuse to finance the U.S. deficit. They consider it too risky to buy U.S. government bonds at current levels of profitability. Fed will be forced to either cut the sale of government bonds, but lose the ability to finance the budget deficit and continue the policy of QE. Either the Fed will be forced to put up with increasing profitability gosobligatsmy that will lead to a large increase in debt servicing costs. Just last week, we have seen a sharp increase in the yield on government bonds. Probably the process of this growth will continue. U.S. national debt currently stands at about 19.9 trillion. USD. According to some economists, the real debt many times more. But even if these economists are wrong, the growth yield of U.S. government bonds leads to the growth of the national debt mnogomilliadnomu and big problems on its service.
Continued QE policy may lead to a situation where the size of the Fed's money thrown into the box will be comparable to the size of the growth in debt service. Economic policy throwin empty trillion nearing its finale regularities. QE policy drove the U.S. economy in a remote corner from which there is simply no painless way out. Economic policy of QE, this peculiar form of doping. She gave the U.S. economy a short-term advantage. But, like any dope, she ultimately detrimental effect on the whole economic organism. If we consider the share of the U.S. economy and the value system in the world economy, the disastrous consequences of these economic policies painfully felt by all of the world economy.
Politics throwin empty trillion in fact not solved a single systemic problem. How not to get the real sector are necessary for its development investment, and now do not. And without addressing investment, employment problem will not be solved. But the problem of these policies are created. Seriously weakened financial sector. Generation of large speculative bubbles. These bubbles can not be released in a controlled manner. They inevitably bursting. And while they hurl stock markets. The current recession stock indices due primarily to the fact that in the current situation is such investors fear the stock market crash. They began to urgently sell their assets in and out of the market.
The world economy is in a state of systemic global crisis. World economy began a transition to a new system of production. Such transient requires systemic reforms and solutions. Emerging issues wrongly reduced to financial problems. Some financial instruments can not solve these problems. Ignoring systemic problems exacerbates the situation. No financial instruments and financial mechanisms can not stop or outwit the laws of development. Vebalnymi promises illusory projections can delay the coming collapse in a very short time. Lots of it will be months. But we can not fundamentally change anything. In the words of the classic - "Anushka already spilled oil."