As we previously discussed in “Green Shoots? – Don’t believe the hype!”, U.S. Federal Reserve Chairman Ben Bernanke coined the term “Green Shoots” back in March. So far apart from a few wobbles everywhere you look in the mainstream media seems to support his statement worldwide. And he backed it up again recently in August saying that the U.S. Economy is on the Cusp of Recovery.
Here in New Zealand the property market appears suddenly buoyant. Sales are up month on month and year on year. We have heard a number of reports of houses selling in Auckland at auction for 15% or more over the council valuations which were only completed in late 2008. Anecdotally there are also a high number of Chinese bidding and buying currently. We reckon this may be due to Chinese investors flush with cash – the after effects of their government instructing banks to lend to anyone with a pulse. See this Wall Street Journal report.
While governments continue to proclaim all is well and the populace continues to swallow it, this current uptick in most assets could well last much longer than we expect. However unlike Bernanke, we still feel the global economy is instead on the cusp of the next significant down phase of the financial crisis in what will be a depression lasting many years yet.
Remember most government and mainstream financial economists and commentators views are in close alignment with Bernanke’s. Pick up any newspaper or listen to any TV news bulletin and recovery is the catch cry. But this video should make you think twice about believing anything that escapes from Bernanke’s lips and by extension most other governments and their agents.
These are just some of the “visionary” (please note the thick coating of sarcasm) comments from Bernanke over the last 4 years:
July 2005: Commented on the lack of a house bubble (yeah right)
And how there won’t be a nationwide drop in house prices in the US (there was),
November 2006: How consumer spending will continue to grow (it didn’t)
February 2007: The sub prime housing problem won’t spread into the broader mortgage market (it has and will get worse over the next 18 months with more mortgage rate resets to hit the middle class in the US)
July 2007: Home sales should improve due to growth in income and employment (They were almost 60% lower in March 2009)
Why should we now suddenly believe someone who has been so incredibly wrong over the past 4 years? How anyone can even take the slightest notice of this we find staggering.
If you spend what looks like amounting to $24 trillion on bailouts the odds are that this will cause some froth to appear, but in the long run the same imbalances still exist and when the froth settles the empty glass will be revealed.
We would urge caution before making any investment decisions based upon the propaganda of any government currently.
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