Whenever buying a Coke in Australia it is hard not to notice the exorbitant prices for a 500ml bottle – usually around $4. Here in parts of Japan you can pick up a 500ml Coke for less than $1. In convenience stores 500ml Coke sells for ¥129 or around $1.50. Either way Japan is a bargain basement country which is often contrary to expectations.
The more you look the worse the data becomes. Above is US job listings. The trend does not look good. It feels as though the US election may coincide when the US tips in to recession.
With central banks going completely crazy with negative rates one questions whether the corp debt markets are just refinancings rather than new financings. Naturally the central bank wants new money to boost corporate spending, it wants banks to take on riskier lending and wants consumers to use their money instead of suffering such punitive savings rates to get inflation in the system. But the word on inflation is simple. It ain’t happening.See below – so many countries are massively undershooting targets.
Milton Friedman said
“There are 4 ways in which you can spend money.
You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.
You can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.
I can spend someone else’s money on myself, then I’m sure going to have a good lunch!
Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.”
Put simply the world can’t get the oomph to encourage companies or people to have confidence. The world’s central banks have rode on the confidence (aka trust) that central banks know what they are doing.
The problem for central banks now is if the world economy slips back into recession, there is almost nothing on the monetary policy front left in the arsenal.