By Pooky-this blog’s business and economics journalist
Everybody Agrees Now
Everyone says now that the global economy has stabilized and slowly improving. But practically everyone also say that it is still teetering on the edge of a long weakness.
So in sum, judging by what everyone says in a combo-package, is that the global economy has stabilized on a teetering point.
Well great-what on earth is the biggest head of the central bank, of globe’s biggest economy, which is the US Federal Reserves, to do now?
What about the US Federal Reserve?
Well according to the Taylor Rule-the cutting edge rule that is adopted by cutting edge central bank around the world that includes the US-there will be an interest rate hike sooner than people think.
And you got to give China credit here-because only a day after the man who created the Taylor Rule said rates hike sooner than later-China immediately cautioned its banks, that are lending massively to stimulate its economy, to be careful about a bubble.
But even with the Taylor Rule, there is nothing as concrete written in the history of mankind, like the words of Mohamed, Jesus or Buddha-and so we human being will still have to try and figure out what the US Fed will do.
If you are interested in my opinion-from living through so many economic cycles both here in Thailand and in the US. I am pretty sure what the US Fed is looking at are signs of real economic activity.
So what is real economic activity-that sets it apart from the collage type that is just well-wishful dreaming like thinking?
Well real economic activity in economics terms are the ones that are sustainable on their own-without the life support of bailouts.
Well like giving China’s central bank credit-you will also have give Obama credit-because Obama just freed his stimulus package to lobbying by special interest groups-well it is the open lobbying type of activity that means everything that is said will have to go down into writing for everyone to see.
So why is Obama doing that?
Apart from listening to his Bangkok educated treasury secretary-well, really, it is to make sure his stimulus makes real and lasting impact-by taking in the interest and concerns of businesses.
Well if one follows that line of thinking-the US Federal Reserve will probably be looking at the same thing-and that is to study and talk to US businessmen.
But what are good business people saying?
I mean what do those good US businessmen-that are thinking about how to reach real and lasting sustainability of the recovery-recommending.
Normally it is productivity increase-but now apart from that-what is it exactly that they are looking at-so if we also look at it-maybe we can guess the US Fed’s action in interest rates-and so make proper planning and some money in the stock market.
Well the signs are really mixed at this point-but many US businesses are focusing on employment figure and purchasing power of consumers. Things like real estate, stock market, GDP and a host of other figures-are meaningless at this time because they are stimulus impacted figures.
But employment and purchasing power are the real things to really watch-and my opinion is that the US Fed is really really looking at this. And this means sectorizing the numbers to pin-point exactly where real and sustainable recovery is taking place.
Well if you look at what really drove Ney York stock market above 9,000 again-it is sectors like materials. And I will leave you with that to ponder for yourself-what that means.