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accompanying growth among emerging economies bloc suggest that raw material prices will remain elevated. This is a very unpleasant economic cocktail for the OECD. Will it erupt in an OECD-wide economic default? That has to be a serious possibility. Maybe only then will the capitalist architecture be effectively reviewed and replaced.


If there is any certainty at all, it is that policy-makers within the European Union will need to be pushed before taking aggressive policy measures. Germany’s austerity-led solution just isn’t going to wash with the mañana attitude of many of the other European economies. Europe, then, faces two possible outcomes. In the first, German austerity results in a decade of recession and debt-busts. George Soros has already levelled this warning at Chancellor Merkel. In the alternative scenario, more quantitative easing results in a persistently weaker Euro and an injection of inflation. The second outcome seems the most likely choice of politicians.


So while it is often hard to associate world record art prices with anything other than a rich man’s folly, the truth of the matter is that rising silver, wine, art, gold and many other physical assets are directly related to the expansion of the money supply. These are what I call SWAG assets. Over the last decade or so, spanning the dot.com bust, the subsequent recession, the credit crisis in the US, the subsequent depression and now the European sovereign debt crisis, SWAG assets have risen sharply in price, defying the malaise in other asset markets.


Maybe it isn’t so odd to see new world records in the auction rooms after all. BF


Yields on Spanish bonds are WHAT???





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