Just two weeks ago, President Obama stated that it was unlikely that we would see a case of the Ebola virus in the U.S. However, just days later, the Centers for Disease Control and Prevention confirmed the first American case. As it turns out, the improbable became reality much quicker than anticipated.
The individual infected traveled from West Africa to Texas on September 19. Symptoms began to appear on September 24. Initially turned away from the hospital, he was eventually admitted for treatment on September 28.
Throughout this period, he had contact with many people, including five schoolchildren. Opportunistic investors seized the moment, purchasing shares in biotech firms developing Ebola treatments, resulting in a noteworthy 30 percent rise for Tekmira Pharmaceuticals Inc.
Betting on Ebola remedies may yield profit, and perhaps it will accelerate the development of a much-needed vaccine. Continue reading
About sixty years ago, economist Hyman Minsky introduced his Financial Instability Hypothesis. His central argument was that economic stability ultimately fosters instability. How does that work?
Minsky noted that periods of financial prosperity often precede crises. The very stability that breeds confidence can also encourage borrowers and lenders to undertake increasingly risky ventures. This cycle results in swelling levels of credit and debt, inflating asset prices.
Eventually, this unchecked optimism spirals into instability, leading to unsustainable levels of lending and debt. Debt accumulates beyond the economy’s capacity to manage, causing financial bubbles to burst and asset prices to plummet as the mistakes of the prior boom get rectified.
Last week, the DOW served as a sharp reminder that stock prices don’t perpetually rise. In fact, something else can, and often does, occur: stocks can decline.
After a slight decline on Monday and Tuesday, followed by a strong rally on Wednesday, the market took a nosedive on Thursday. Continue reading
The World Becomes Disorder
By Donald G.M. Coxe, Chairman, Coxe Advisors LLC
Are we witnessing the end of the post-Cold War global economic boom?
Since the collapse of Bolshevism, the world has enjoyed remarkable growth in international collaboration, driven by liberalized trade and technological advancements. For the most part, financial assets have thrived, contributing to enhanced prosperity globally, with only two notable interruptions—the tech crash of 2000 and the financial crisis of 2008.
The world displayed rapid growth following the Cold War. Despite significant corrections, commodity prices generally surged:
- Oil surged from $15 per barrel to as high as $140, then fell but rebounded to around $100.
- Corn rose from $2 to a peak of $8 before slipping to $3.60.
- Copper jumped from 80 cents to $4.30, followed by a decline to $3.
- Gold skyrocketed from $350 to $1,900, before retreating toward $1,200.
So, what’s the story behind current commodity prices? Is this simply another fluctuation, or has a fundamental shift occurred? Continue reading
This weekend, finance ministers and central bankers from the Group of 20 met in Cairns, Australia. These astute officials believe that, with the right mix of fiscal and monetary policies, they can revitalize the global economy. Their approach suggests increased stimulus and artificially generated demand.
“We are determined to lift growth, and countries are willing to employ all our macroeconomic tools—monetary, fiscal, and structural—to rise to this challenge,” declared Australian Treasurer Joe Hockey, the event’s host. The G20 leaders aim to increase global growth by 2 percent, but progress seems elusive.
At the current trajectory, they may fall about 0.2 percent short of their goal. Yet, it’s not due to a lack of effort. “Nearly 1,000 measures have been proposed that could boost global growth by 1.8 percent by 2018, closing in on the ambitious goal of 2 percentage points set back in February.”
The goal may eventually be reached, but here at the Economic Prism, we suspect it will be more due to serendipity than sound policy. Continue reading
