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COMMENTARY: Friday, November 1, 2013.

QE-Infinity II: Contained Depression…

…at least that’s how Martin Wolf sees it.

And we are inclined to agree that the Fed may exude confidence but is in fact terrified by the prospect of ending one of the few upbeat psychologies in the economic and financial arenas right now. We had the distinct pleasure of seeing the Financial Times’  Chief Economics Commentator Martin Wolf discuss his view of the New Normal in the World Economy last week at the Chicago Council on Global Affairs. His credentials for discussing this are manifest, and I suggest reviewing his brief bio on the FT journalists page if you have any doubts. And if you don’t already have at least a free registration with the FT… just do it!

Just to be clear the video above is actually from his October 2^nd John Weatherall Lecture at Queens University, Kinston, Ontario. Much of his discussion was the same as at the Chicago Council, yet at the Queens’ lecture the graphical presentation of essential economic and financial indications is included. And that provides greater clarity on the various points he makes so well.

And why is it reasonable to describe the current state of the world economy as a ‘Contained Depression’? Because so many of the conditions are similar to those of the Great Depression, even if the Fed and other central banks have done a much better job of buffering this one than the last. Yet that does not necessarily mean there is effective use of capital. In essence, the world economy has gone from a state of being over-leveraged at the height of the recent Dot.Com and especially subsequent dual Credit and Housing Bubble to having too much capital with nowhere to be effectively employed.

For the full discussion we strongly recommend viewing the entire Queens University presentation. Yet a couple of the key points are of particular interest to us as non-believers in the hyper-extension of the Fed’s QE-Infinity program…

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