"The panic appears to be over. Now is the time to get worried."
William Keegan, Author and Journalist
It's been over three years now since the formation of the UK Coalition Government between the Conservatives and Liberal Democrats. Austerity was supposed to be on the agenda but the reality differs, there is still budget deficits, increased spending and lots more debt. Private debt still remains at historic high levels. As all politicians always do, with an election due in less than two years its time to engineer a boom based on a policy of reckless monetary and fiscal policy. Public debts are over 1 trillion pounds, yet mainstream politics has a consensus towards further spending.
The conservatives have recently announced the "We'll help you buy a house" scheme to try and inflate the recently lagging housing market, creating the voter "feel good" factor. Monetary tightening is mentioned, as it has since the crash of '08, but words do not match the actions of our monetary overlords who continue with loose money and low interest rates. BoE recently appointed Governor Mark Carney is all for abandoning inflation targets, instead shifting the focus towards Growth, a move mirroring the priorities of the Federal Reserve. Janet Yellen has been given the the nod by another big spender Obama. Stuck within the confines of academia and Government agencies she makes a good choice to a leader who has not attempted to tackle the deficit and whose legacy will be a disaster for his successor.
The Eurozone still has too much debt, the plasters continue to hold but like any temporary measure are making the problems worse. America continues to raise the US debt ceiling as though it has validity. If they keep raising it at will then how can it be called a ceiling. Cuts from all corners of the Globe are hypothetical.
Fundamentals, as always, are key. A panic can reside but the fundamentals always come back into the picture. Golds bull market is not over, its just on its next leg, like it has been over the past decade plus with various ups and downs just like any Bull market. Governments can't defy economic reality of spending money they don't have - bond markets, currencies, commodities - will all catch up with their reckless spending. Running budget surpluses is hard work for Governments only when a party feels they require to obtain economic credibility from the electorate does a political institution follow such a path. With all parties in the UK promoting spend-onomics there will be no immediate return to that concept.
I never believed this current Government would sort the mess and they are doing what I thought they would, dodging the real issues, tinkering on the fringes with little progress to show for it. Expect more short term polices. Tackling long term issues are no good for politicians precious votes. Ironically the short term Tory boom will please Keynesian's who will proclaim our troubles are over. In reality the problems continue to compound.