The original article can be found here.
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In recent weeks, the economic press has been flooded with increasingly worrying data about the global economy. A notable example is the crisis in Germany’s auto industry caused by the announced failure of a multibillion-dollar investment in electric vehicles. The country’s business confidence is in dire numbers. Significant layoffs at major high-tech companies. And China’s economic stagnation necessitates stimulus, as the real estate sector has come to the brink of collapse multiple times in recent years.
On the other hand, the stock financial market presents a completely different picture. The Eurostoxx 50 is nearing its highest level for the year, Spain’s IBEX 35 is near its highest since 2015 and the US Nasdaq 100 is at record levels. This comes as oil prices plummet and inflation declines, with deep interest rate cuts in Europe and the United States looking certain in the coming months. Recent moves in financial markets have been as much about celebrating China’s economic stimulus through market gains as celebrating the spread of gangrene from the foot to the knee.
Stock market maxims should be interpreted with great care, but in this day and age, some are definitely clear. For example, if, as in this case, the economic data indicates a recession but the stock market is experiencing a euphoria, we are probably on the brink of what is known as a “market crash.” may be. The preview, which took place in August last year, appears to have been a deliberate experiment to take advantage of the typically low trading volume during the summer, when price manipulation becomes easier.
All of this is tantamount to saying the economy has run out of ammunition, and the expected rate cut is a continuation of the spree that began in 2020, when the market was effectively flooded with money created at the discretion of the banking authorities. It is the grand finale. .
As long as markets continue to celebrate the flood of money as a success, chronically low wages and unrelenting taxes will cause the purchasing power of the people to plummet, while much of that money will flow into financial investments and feed the machines of brokers. be. This is why I denounce the profound immorality of a system characterized by the much-touted “free movement of capital, people and goods,” in which finance eats up the economy and, as a result, the powerful eat it up. We’ll probably find more in the future. It devoured the weak.
Gonzalo J. Cabrera, Alberto Ruiz de Galarreta Cultural Circle (Valencia)
Translation by Gremio San Geronimo
