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Still under emergency measures

Published Tuesday, March 3rd, 2015

News is good as long as it is not bad. Expectations have become so dampened that deflation in the eurozone of only 0.3% in January is greeted with relief. Unemployment falling from 11.3 to 11.2% is promising and small falls in Greek unemployment to 25.8% and Spanish to 23.4% are encouraging. The banner headline for yesterday is that after 15 years the Nasdaq finally closed above its dot-com bubble high of 5000, although if inflation is taken into account it needs to reach 6900 to match the inflation adjusted March high.

The truth is that the global economy seven years after the onset of the financial crisis is still under emergency measures wherever you look:

– If you consider the emergency measure of QE as a series of steps to be taken before it is fully completed, then no-one has yet completed the cycle. The US is still dithering about exit, frightened to take the first step on the interest rate high wire for fear of killing off the recovery.

– The European Commission tells us that the eurozone is out of recession and on its way to recovery but the ECB feels the need to embark even now on QE to combat deflation and weaken the euro.

– The UK economy appears to be progressing well but for the 72nd time since March 9 2009 the Bank of England will on Thursday roll over its record low 0.5% interest rate and hint that the next move could be up or down.

to read the rest of the report, please click here

Posted by David Hufton