Trying to make heads or tails of it all, I thought I would do my best to simplify the picture in the outside markets. Especially since our markets seem to be filled with so many contradictions these days.
Are we in the midst of a massive global economic boom, or is global economic growth actually declining? Is inflation low like some in the US government believe, or is it raging out of control as others are reporting? With this in mind we really do have a tale of two tails. In one corner you have the BRICs (Brazil, Russia, India, China) where the economies are surging, jobs are on the rise, payroll is on the rise and inflation is raging. In the opposite corner, you have Europe, Japan and the United States who continue to struggle with jobs, payrolls, housing prices, etc... If you look deeper into the past you will notice that prior to the 08-09 financial crisis neither the US or Europe had really seen many significant set-backs in some time. The game of continuing to pile on debt and paying it back later had never been questioned and had never been a cause for concern. The BRIC's on the other hand had learned their lessons from the Asian crisis back in 97-98 and the Argentine crisis back in 2001, and chose to follow a different path, one that included paying down their debts and accumulating larger reserves.
Therefore when the financial melt-down occurred in 2008 the US, Europe and Japan were rocked, while the emerging economies were far less affected. Certainly they struggled, but the depth of their set-back was nothing in comparison to that in the US, Europe and Japan incurred. As investors were left with very few opportunities here at home or in Europe they were forced to look towards the less affected emerging markets. As hot money from around the globe poured in, these economies simply exploded. These runs have caused inflation to increase rapidly as jobs and wages are growing by leaps and bounds and demand for everything from raw materials to foods, clothing, entertainments, etc... are all on the rise.
On the flip side growth here in the US, Europe and Japan has been much less substantial, fewer jobs have been created, wages are not on the rise, and government debt levels have not been reduced. In addition, we are now seeing the ripple affects of higher inflation and increased demand from the emerging nations hitting our shores. Raw material prices are higher, energy prices are higher, and food prices are higher, all associated with growth and demand from the emerging markets. Do I think China and some of the other countries should be raising interest rates? Certainly. Do I think we should be raising rates here in the US? Certainly not. We need to to start by improving the unemployment picture and getting payrolls heading higher. This should spark some increased consumer spending and help our business grow. As growth starts to stabilize we need to aggressively reduce our government debt load. Then and only then can we afford to raise rates. Jobs and debt reduction have to remain our focus. Until we bite the bullet and do it the right way I doubt we are ever able to get out of this massive hole without seeing continued setbacks. It is my opinion that taking shortcuts and the easy road is what has gotten us in this predicament, while some of the other countries actually paid the piper and are now heading in the right direction. As long as those in charge are more concerned about getting reelected rather than doing what is best long-term for this country we are going to struggle. Rather than making the tough unpopular decisions, everyone simply wants to do what is the easiest and will make the least amount of voters upset. I hope this theme changes soon or before long we may no longer be the lead dog.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry. Van Trump traded professionally at the Chicago Board of Trade and the Kansas City Board of Trade, often advising some of the biggest players in the market. Van Trump recently launched Farm Direction in an attempt to help farmers improve their overall marketing efforts. In this blog, he'll help guide you through some of the pitfalls and mistakes associated with marketing in today's volatile markets. He will help you build and execute a plan that is right for you and your operation, while providing you with his specific marketing thoughts and current positions. E-Mail Kevin at
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