The Dow Jones I suggest is going to have a very volatile week. Why? It is likely that the Dow Jones will re-test its recent low of 11,680 points. Whilst I think it will sink to this level I think the index will close the week above 12,000 points, and thus maintain its uptrend.The rationale for this is that the US is pushing the globe towards a new monetary standard. By debasing the USD, they will actually be increasing taxes through 'bracket creep' and giving people the perception of rising markets. Oh you say - What about inflation. Not our fault! Its just because of China's insatiable demand for commodities, which is forcing up prices. Well you could be forgiven for believing it, if you read newspapers. I do when I run out of tissue paper.
You might ask why the US would want to debase its currency? I think the rationale is that it holds real assets whilst Japan and China are holding paper (treasury bonds) which are payable in debased US dollars. But aren't wars fought over such things? Well I suggest not, given that the USA didn't force the issue of currency manipulation in the Asian Bloc. No one cares though as long as there is growth on the table. The positive side is that the these economies are opening up. There are now 4.5 billion free traders when a decade ago there was more like 1 billion fully- fledged free traders and 3.5 billion traders with constrained access.
The next policy issue is to start thinking about the quality of thinking by these 3-4 billion free traders, and not just in the developing world. Evolution seems to have taken the slow democratic path to progress. Not that a consciousness can be forced to think, but they could do with some positive education.
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Andrew Sheldon www.sheldonthinks.com
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