patrick.net

No, BB won't be Volcker, and that's what I am betting on (god helps my portfolio if he turns out to be a Volcker).

The market is now fully priced in for the June 25-50bps raise. If the raise is 25 bps, the market will already be in a rejoice mode. Gold has held up quite well, still up from the beginning of the year under such distressing news (for gold), and significantly up from last year. Oil holding up nicely and we still have two critical points to pass, the hurricane season, and the winter (if it turns out to be normal rather than warmer than usual like last year, if it turns out to be colder, pay day for energy investors). US needs to raise to at least 8% at this point to break gold and oil. But US economy will already be in shambles if we go near 6%.

IMF already came out to say that Japan should rethink about stopping its ZIRP so fast, ECB is coming out to say they don't like Euro going above 1.3 (competitive currency devaluation anyone?), and BB will have no choice but to pause beyond June.

If things continue to get ugly, I predict no rate raise in June. Then gold and oil will be happily back on the rise again.

JH,

The government costs jobs because of what is called structural unemployment. Purely speaking, every single labor law and every single government job creates a degree of structural unemployment.

Much of this is good and necessary. We need to employ people to run the government. We need labor laws to keep from returning to the early Industrial era.

But it comes at the cost of labor flexibility. There is a balance; a trade-off. Most Western European countries, especially Germany, have traded a lot more "free market" caused unemployment for structural unemployment. This keeps people happier for a long time, but causes exaggerated economic strife during times of painful restructuring. So they suffer a lot of pain every few decades, we suffer constant pain but at a lower level.

The US has much less real unemployment than Germany. Their counter would be that the US has more underemployment, and that this is not any better. I don't have an opinion other than pointing to the US' dramatically more flexible labor, business, and market environment. It is this which will probably save us from the coming demographic crunch (by save us I mean the US won't fundamentally be changed politically by it), whereas Germany et. al. will likely be barely recognizable after they swallow the demographic pill -- probably a function of poorly planned, unwanted but necessary immigration. This is already ripping parts of France apart.

As to my politics: I am "into" politics the same way Teddy Roosevelt was.

This is already ripping parts of France apart.

France is always being ripped apart, it's what they do best. They love it.

DS

The French are a paradox unto themselves.