What will happen to markets when QE ends? | FT – Gavyn Davies

Bank of England

Bank of England (Photo credit: Wikipedia)

This is an excellent article from the respected macro-economist, Gavyn Davies, writing in his FT blog. If you are financially literate, it is well worth a read. Check it out!

via What will happen to markets when QE ends? | Gavyn Davies.

My simple conclusion from reading the article is that we should not necessarily expect markets to crash when QE ends (quantitative easing); there will obviously be a period of adjustment as highlighted by Mervyn King, outgoing head of the Bank of England. However, in my view, by the time QE ends, economic fundamentals will be on a stronger footing. This is good news.

Hopefully, major corporations will start to invest some of their piles of cash soon? When big corporations start investing in major capital spending and acquisitions, it will filter through the economic food chain and hopefully create jobs and give unemployed young people renewed confidence and hope; for many, capitalism is still on trial.

At the moment there is a major disconnect between those with financial assets and those dependent upon wages and salaries. The first group, let’s call them the “wealthy” are doing surprisingly well on the bull-run in financial markets; meanwhile, the second group, we can call them the “workers” are squeezed by austerity measures in the US, the UK and the Eurozone – the “workers” are also being squeezed by non-availability of  low-cost credit.

For me, it is time for the benefits to be shared. I am not talking about redistribution from the “wealthy” to the “workers”, like in Francois Hollande’s France. I am referring to fiscal stimulation and deferring austerity a little; watch the US, the UK and Germany; they will lead and others will follow and share the benefits.

Any thoughts?

The Bank of England in Threadneedle Street, Lo...

The Bank of England in Threadneedle Street, London. Deutsch: Sitz der Bank von England in der Londoner Threadneedle Street. (Photo credit: Wikipedia)

 

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Cyprus a Contender to Be Major Supplier of European Gas | Business | The Moscow Times

English: Map of Cyprus showing districts

English: Map of Cyprus showing districts (Photo credit: Wikipedia)

This is an excellent  article published in the Moscow Times and well worth a read. Check it out!

via Cyprus a Contender to Be Major Supplier of European Gas | Business | The Moscow Times.

For me, given that Cyprus is likely to be supplying up to 40% of  Europe’s gas in the decades ahead, surely it is time for Europe’s leaders to reassess the  strategic relationship with Cyprus?

Ahead of the German election in September, Cyprus got a very tough financial deal from the troika (EC, IMF and ECB) in March because of political pressure from Berlin. As a result of excessive austerity, Cyprus and her citizens will suffer much unnecessary pain over the next few years. Whilst Cyprus remains in crisis because of the terms of the austerity package, elsewhere in the world, excessive austerity has been totally discredited by mainstream economists like Paul Krugman and even the IMF itself.

Although Cyprus has many olive trees, it would be wise for Europe’s leaders’ to reach out to Cyprus and try to help her realize her strategic goals, like effective production of offshore gas and oil; it’s a time for olive branches.

Any thoughts?

 

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