FT.com / UK - The world teeters on the brink of a new age of rage

I've been getting calls and questions about the world and the markets, so I thought I would share some of what I'm reading.

First, there was this article written by Simon Schama in the FT this weekend. Schama is a great historian (he wrote a three part series on the history of Britain that I recommend for summer reading) and so brings a different perspective to the current euro situation.

And his thoughts are troubling only because they could possibly foresee considerable social unrest. Here's an excerpt:

...Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? The full impact of the overthrow of these assumptions sinks in and engenders a sense of grievance that 'Someone Else' must have engineered the common misfortune. The stock epithet the French revolution gave to the financiers who were blamed for disaster, was "rich egoists". Our own plutocrats may not be headed for the tumbrils but the fact that financial catastrophe, with its effect on the "real" economy came about through obscure transactions designed to do nothing except produce short-term profit aggravates a sense of social betrayal.


FT.com / UK - The world teeters on the brink of a new age of rage

Then there was Ambrose Evans-Pritchard's column today which notes that current events in Europe are fueling a move back towards rage against capitalism and a move towards socialism:

Europe's deflation torture is a gift to the Far Left

Ambrose makes the point that Germany is far from the innocent victim in all of this. Instead, he notes that a good deal of German growth in recent years has come from their policies in regard to the Southern European nations:

It was refreshing to read "The Euro Burns" by Michael Schlecht, Die Linke’s economic guru, arguing that the primary cause of Euroland’s crisis is "German wage-dumping". He shows from Eurostat data that German labour costs rose 7pc between 2000 and 2008, compared to 34pc in Ireland, 30pc in Spain, Portugal, and Italy, 28pc in Greece and Holland, and 20pc in France. Again, my loose translation.

Germany ran an accumulated trade surplus of €1,261bn over the period, while Spain ran a deficit of €598bn, and Portugal €273bn. This shell game was kept afloat by recycling German capital to Club Med debt markets beyond sustainable levels until it all blew up over Greece. The Club Med victims are now trapped.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7756879/Europes-deflation-torture-is-a-gift-to-the-Far-Left.html

I hope these concerns are not real but I'm afraid they are. I'm also not sure of the investment implications of all of this other than to continue to emphasize higher quality stocks and bonds, and realize that while the government may be trying to help the situation, their cures could possibly lead to more serious problems ahead.