Expected year priceearnings ratios are reasonable

In its Edition last Saturday, the large and very critical daily Frankfurt, "Francfurter Allgemeine Zeitung", opened its financial page citing optimistic judgment of an operator of Deutsche Bank in a title printed on 4 columns: "A fantastic scenario for actions." Bernd Meyer indeed seems to literally no doubt nothing. He thinks that "there is no recession." that "already we have..., for the years 2007 and 2008, on a good situation". And enumerate its reasons in the same vein: "Prices lower for the oil, lower inflation, new increase in interest rates, which will be to the contrary on the decline, it could form a fantastic scenario for actions."

Thus expresses a representative mandated of the largest banking institution of Germany. His words are similar in their own way, to the dark final prognosis that ran on the markets there was little more than a few weeks to announce a sustainable higher oil prices. Logical O of specialists! They had forgotten factor "speculation" obviously overheated markets.

Forecasts of private experts and officials alike would reflect not something other than the positions taken by traders, rising yesterday on the oil prices, today on the stock and the evolution of the rate They are often contradictory. Yesterday, it was thought to an indefinite increase of oil prices to better advocate the formation of new giant groups, and this while balancing the serious chances of a strong recession. Today, we want to imagine that with conditions in the beautiful fixed through the decline in the price of oil and other raw materials, the ECB and the Fed will leave rates at their current (still too low) level. The versatility of judgements made infamous during the volatility of the market yet, said faith of theorists, driven by "rational expectations". sinking of some contemporary American thought (economics, specifically)!

Its radiation would cause that the absence of any competition in an area where it would be particularly necessary that there are a living (it is possible, as a challenge to the principle of profit maximization, obviously foreign by nature in a competitive market) But leave aside this aspect yet essential things, due here also to the extraordinary concentration of the means of expression and influence. No reason that the domain of thought beyond the Vertigo of the behaviour of monopoly so heavily favored by financial deregulation.

The question is whether stock renewal seems has a future if it can now only see that a new bubble likely to lead to potentially serious collateral damage to social order than those that are attached to the grotesque real estate prices. If we take the gold for the ultimate expression of the currency, the Dow Jones is barely half of its previous record on January 14, 2000 (11.722,98).

First observation: on the major markets, the courses are not so high that it (see our Chronicle on October 6, "The myth of goodwill"). Expected year price-earnings ratios are "reasonable". The & Standard Poor's 500, this ratio is 16-17 (in the 1st quarter of 2002, it rose to 46!), in Paris, main square of the Euronext, it oscillates between 12 and 13. But this relative moderation comes with great credit inflation and, therefore, of the debt. The stock exchange is supported by the announcement and, possibly, the realization of mergers and acquisitions, financed by loans with high leverage. Be remembered for the popular a few years of the "bank-insurance": a complete flop! It is also by redemptions that are companies of their own actions. A particularly vicious form of Malthusianism which reflects the dramatic lack of imagination of the managers to find investments! What hole would be fallen scholarships in the absence of these artificial transactions

Credit conditions are more and more complacent, at least for large units (but the requirements for debtor, very severe and often discouraging SMEs): indeed, banks give their portfolios of risks to investors, they are less fussy on the quality of the signature of the borrower. According to a survey of credit Switzerland, the average of bank loans to large companies in need of expansion external (or engaged in private equity) is equivalent to 5.9 times their earnings before taxes, interest and depreciation. In 2001, the multiple was 4.7. The percentage of bankruptcies is low, even for medium-large companies and above. Where is the regulation of the capitalist market

Nothing of all this, at least at this level, would be possible without the influence of the system "us public debt, international currency," often denounced in these columns. Some noted that the US is by train, smooth, reduce the magnitude of their deficits financed by Asian central banks. Their budget deficit is in decline from the forecasts. But it is reason backwards. The reality is that the huge us financial system, public and private sector institutions (banks, "hedge funds", etc.), stalls, so to speak, on the credit standing and unlimited in the current and future political configuration (to human sight) which is so open. Thanks to this extraordinary ease, it swims in a bath of cash which is spreading all over the world. The willing lenders, albeit involuntary, now outside the Central Bank of China, while the largest purveyor of credits in the United States (total of its assets in bonds and obligations of the US Treasury: 987 billion to 31 September) and the institutes of issuance of the neighbouring countries. Purchases of U.S. Government securities by the Central Bank of Russia grew twelve months of 80 to a total of $ 250 billion. The Brazil keep him way, the Mexico also. What are the central banks of different countries, is monetizing a fraction more important of the public debt us. Pure inflation. By this process, they help prevent a recovery which would no doubt sharp rate of interest.