The Real Reason Behind The Debt Crisis Is The Absence Of Solvency In Markets

The Real Reason Behind The Debt Crisis Is The Absence Of Solvency In Markets

By e-Focus Stock Watch

After last weeks decision when central banks cut the swap rate by 0.5% markets are celebrating. With no doubt this action will give liquidity to the banking sector since the rising demand for dollars leads to higher borrowing cost. But we should not disregard problems which still exist in the global economy and maybe lead markets further down:

the real reason behind the debt crisis is the absence of solvency in markets which leads to liquidity problems. Undoubtedly the decrease in swap rates will give a boost to the money markets but still the root is that markets does not trust anyone anymore. Even German 10-year bond showed significant increase at 2.26% the same happened with Spanish 10-year bond at 6.70% and Italys 10-year bond at 7.26%. The yields above are showing the global concern about the European countries and how much unwilling are central banks and private investors to finance them . Concluding, the benefits from this central banks decision maybe are for short term period but also means that for one more time central banks came too late and used the wrong medicine

U.S stocks are not cheap since they trade 21 times average earnings of last 10 years according to data compiled by Yale economics professor Robert Shiller when at the same time the average since 1880 has been 16 times

the US unemployment rate is still too high 9%, number which does not really reflect the real unemployment rate since a big proportion from them are part time workers so they cannot really help U.S. growth since they have not enough money to spend

countries such as Spain or Italy are on the way to IMF. Greeces crisis picked after IMF came and saw behind curtain of Greek corruption this means that maybe IMF unveil secrets in Italys or Spains economy that will lead market closer to the bottom

at the moment Chinas economy hold global economy from total collapse but the last results from the real estate sector are showing a significant slowdown that reflects to the Chinese economy too even though I believe the Chinese economy will continue to expand the question is for how long

we should not forget the Santa Claus rally that boosted by yesterdays news. Usually it takes place around middle of December and picks New years eve but this time maybe came earlier especially after last weeks 7 consecutive negative closes