The Editor is sceptical about El-Erian’s “multi-speed analysis” and I am too. Much of this interview was negative and gloomy about the global economy and, yet, when the interviewer challenges him over PIMCO holding a lot of cash, Erian seems to come alive with all manner of investment opportunities, which are based upon this multi-speed analysis of his.

The interview starts with the “deteriorating debt dynamics”, because of which governments opt for financial repression by paying savers LESS than the rate of inflation. Indeed, no one doubts that the debts are so great globally that such a damaging measure has to be considered by democratic governments, but there is no cause for optimism in financial repression.

Erian then goes on to tell us that if we don’t get the “grand bargain” in advanced economies in order to meet the need for big structural reforms, then the deteriorating debt dynamics will not be solved. But, he tells us, the political system in the world today is not amenable to the grand bargain so that we are unlikely to get the reforms that are needed, because politics is simply too polarised.

He gives an example of the US structural problems in the “very large and worsening unemployment problems”.

Yet, out of all the economic gloom and political paralysis, he pulls out his “multi-speed analysis” like a magician producing a rabbit out of a black hat. He tells us that what you have to do is to look for those economies and sectors which are not going to impose this financial repression on people.

He says that countries like Canada and Australia will not do this financial repression nor will sectors amongst the multinationals with cash on their balance sheets. Yet how will Canada and Australia be sheltered from the worsening, deteriorating debt dynamics given time, when the world’s largest economy is structurally impaired and unable to do anything political about it?

As the Editor says, the slow growth in the West and in Japan is going to be a drag on China’s growth and presumably also on Australia and Canada as well, and might well throw all these economies into reverse, so that even they are forced to give their savers less than the rate of inflation.

El-Erian ends with a wildly optimistic comment: “there’s lots and lots of opportunity out there if you’re aware of what games’s being played”. Right! So why is PIMCO still holding on to such a lot of cash when El Erian is so aware of the game that is being played out there?

According to CNN, mass protests are being planned in Spain using Facebook. The police (The ones with the .40 Glocks, not the great 80’s band) have said they will prevent them ahead of Sunday’s elections which may sweep the conservatives back into power. They were thrown out because of the retail sale of 30% hydrogen peroxide solution that the terrorists used to make do-it-yourself explosives and blow up a few trains, as I recall. I forgot what they mixed it with, but I think it makes some flammable powered material burn explosively, like a strong oxidizer can explosively burn finely powdered dark pyro aluminum. That is what the terrorists used in Bali. Unemployment in Spain among the young is mind boggling. Tear gas is bad for tourism.
I fail to see how Spain won’t eventually melt down from the effects of their giant real estate bubble. Don’t own any big banks if that ever happens.
China is running a centrally planned economy. As long as the USA is healthy enough to keep buying stuff from them, they will grow until peak oil strikes. As long as China grows, Australia will be fine. It is a treasure trove of natural resources with few people to absorb all the money. So is Canada. (That is why I covet it, even with the permafrost.) In a way, China is loaning the USA money to use to buy their stuff. It can’t go on forever, but it might for another decade.
Someone on a newspaper web site accused me of being anti-Chinese because I said that New Zealand and Australia would soon be overrun with rich Chinese tourists. (Really, go figure.) That, as I type on a laptop made in China, and watch a DVD+RW on a recorder made in China, on a 55″ flat screen made in China. I must be, because both my new A/C condensed and 12″ Meade telescope were made in MEXICO. I took a picture of them with a new camcorder made in China. I didn’t reply.
At least it was unusually cool enough yesterday for me to paint my hurricane shutters. That will be it for work outside down here until October. It has hardly rained here for over a month so the grass isn’t growing. The land in the spillway is so dry that it is absorbing a lot of the Mississippi River water.
Did anyone see Putin showing off the new Russian car that wouldn’t start. I laughed out loud for real. Are those Russians lucky that they can trade natural resources for everything they need, or what. Those were some tacky looking steel wheels on that little car. Isn’t Russia one of the largest aluminum manufacturers? They have mastered the ICBM, but not the aluminum wheel. If only it were safe to invest there, or in Venezuela. People could make a fortune. Check out the size of that Russian continental shelf on Google Earth. How much gas is under that sucker. I say a lot.
And lady, if you’re reading this, I bought a pair of Russian night vision goggles once, so there.
End possible sarcasm. (I had to write that because someone thought I was being serious when I wrote in the Darwin newspaper that I had no idea that Alice Springs needed to close its’ run down public parks, and develop them as housing, (As some politician had suggested to eliminate the crime in them.) due to a land shortage in Australia. I said that Google Earth needed to update their images because it looked like Australia was still mostly empty. Someone set me straight that indeed Australia was still mostly empty, and that the Google images are indeed recent. How could we live without this Internet for facts? And their vote counts as much as yours. At least the falling dollar is once again pushing the Dow up.)

Ed Note: Bill you spoilt my morning, I was planning to go to Barcelona for my holidays!