Volatile and Sluggish Growth Will Persist

Calculated Risk has a post today that describes the stock market landscape in the light of relevant facts and filtered emotion. His post is based on an article in the WSJ. Here is a link to the post and the conclusion he writes is what follows.

"Although growth is sluggish - due to the significant slack in the system (excess capacity, lack of demand) and also high levels of household debt, I think the volatility this year can be blamed on a series of events including extreme weather (significant snow storms, flooding, hurricane Irene), the oil price increase related to the "Arab Spring", the tsunami in Japan, and the debt ceiling debate in D.C. during late July and early August.

Also the ongoing European financial crisis keeps flaring up and impacting the U.S. economy.

Yes, the economy is very sluggish - 103,000 jobs was a weak report, just better than low expectations - but I think the economic volatility is related to events and hopefully not some new normal."

Don't trash our US Treasury reserve holdings, or else...

Another gem found on Safe Haven is written by Clive Maund, a gold bug. His article is making several observations that are important to be alert to. He is in a small number of market watchers calling for a much higher dollar. Most interesting, is the discussion that the stock market is subordinate to the Treasury market and is therefore a sacrificial lamb anytime protection of the dollar is needed. Finally, his article includes an interesting technical analysis of gold and it lends support to his other points, such as a strong dollar. This is certainly effective at helping me better appreciate the job in front of Bernanke.

Big overseas Treasury holders such China and Japan are believed to have "strong-armed" the US in the recent past behind the scenes and essentially said "You either quit undermining your currency and defrauding us with your zero interest rate policy or we are going to dump them, big time, and collapse the Treasury market." The Treasury market is the "aorta" of the US, which involves swapping essentially worthless paper for the goods and services of countries that are dumb enough to buy them, thus allowing the US to live way beyond its means running continuous massive deficits. It is viewed by the administration as infinitely more important than the stockmarket, which is small in comparison. It is thus clear that if it is necessary to sacrifice the stockmarket by raising interest rates to rescue the Treasury market, then that is what's going to happen.