Such events have rattled the nerves of global investors, who, in turn, set out to roil the markets as they hung on to every fresh news development while trying to remain safe from all types of perceived harm. Safe-haven assets obviously benefited from the upheavals, even as some of them were lifted to values far higher than their underlying fundamentals might provide for. But, at the end of the day (make that of the quarter), the initial uncertainties and apprehensions related to these serious occurrences have been replaced by some certainty.
There is acceptance of the terrible human and economic toll of the Japanese quake, and there is the conviction that the country will get itself back on track. There is a path that the UN, NATO, and allied forces under its command are headed down upon, and it stops with the ousting of Col. Gaddafi. His Prime Minister decided to “cut his losses” when he resigned and defected to the UK yesterday. Finally, there is a growing realization that EU is not exactly synonymous with the euro, and that EU membership (or the lack thereof for that matter) does not define the destiny of any particular country.
PIIGS can, indeed, fly, and they can fly away from the union, if they have to. A multi-tier union, based on deficit levels of countries to be included within such divisions is not out of the realm of possibility. However, none of the above portends the imminent or subsequent TEOTWAWKI that doomsday-oriented financial publications have offered their readers during the past 90 or so days.
An offer of a different type was made by US Treasury Secretary Geithner on the eve of the G-20 summit taking place in Nanjing, China. Mr. Geithner proposed that the easing of controls on currency exchange rates and the aiming towards more market oriented policies by various nations could be the key ingredients in the combat against inflation. While on the surface the suggestions sound constructive, certain Chinese officials have construed them as thinly veiled pot-shots at China’s currency control regime.
Meanwhile on Mr. Geithner’s home turf, the pace of economic growth appears to now be even more robust than was previously estimated. This has taken place despite the still-sluggish pace of job additions (which continues to obsess the Fed and the Obama administration). In fact, when the growth metric is applied to the major global economies, it turns out that that of the US has outpaced the UK’s, France’s, Germany’s, Italy’s and Japan’s. America’s economy only (and slightly) underperformed that of the Great White North. Bob and Doug are very happy.
The explanation for the American recovery phenomenon partly lies in the sharply higher productivity rates currently being manifested by the American workforce. Mind you, “productivity” is not what everyone calls the situation. Some label it as plain old fear that once a job is gone, it may be very hard to get another one.
Thus, pedaling harder at one’s existing job (and counting one’s blessings while toiling away on weekends and through other overtime) has become the new ‘normal’. As a result, and contrary to economists’ expectations (based on historical as well as comparative data from other countries), US productivity growth has doubled from 2008 to 2009 and then, it…doubled again, in 2010, as measured by the OECD.
Until tomorrow, back to the job at hand: watching it all gyrating and churning.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America