 | IF 200 -- August 29, 2011 -- 6/20 |
History might not repeat itself, but it often rhymes! It is, therefore, insightful to look at historical evidence. The following historical charts leave investors with little hope to recover soon losses accumulated in recent weeks. The historical Gold chart on the left highlights that September has been the best performing month for the yellow metal since 1968. Moreover, the Dow Jones Industrial Average historical chart (bottom right) highlights that September has been the worst month for equities since 1885!
The world appears locked into the misguided belief that economic prosperity can be achieved by encouraging speculation and by distorting the set of investment opportunities through government interventionism. Enormous fiscal and monetary concessions, extended to financial markets and the banking system over the last three years, have failed to deliver the expected results. Policy makers are postponing indefinitely the “day of reckoning” and continue to “rescue” bondholders through mechanisms that are increasingly distasteful to the broader population. A major restructuring of debt would set again the world on long-term economic recovery path. “Creative Destruction” (Schumpeter) is the clearest way forward for the global economy. Will global leaders awake to this reality and act constructively in the future?
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