China’s Slump in Growth Causes Markets to Stumble – Oil and Gold down – Tales of Taxes and Debt.

In brief, yesterday, on the way into Boston, one look at market news found gold slumping and China a concern among investors as there was a slump in the nation’s growth. The Chinese GDP fell slightly, down 7.7 in the first quarter, from 7.9 in the previous (See Graph from The Australian below.) China is Australia’s largest trading partner, as noted in the Australian. “US retail sales and consumer confidence data disappointed late last week, while gold led a commodity sell-off to below $US1500 an ounce -- its lowest price since 2011 -- on concerns about the sale of bullion by central banks, driving down shares in gold producer Newcrest Mining by 8.2 per cent.”


The above graph from Bloomberg,via the Australian


There have been, of late, more than a few “doomsayers” speculating on what can be termed as a “financial apocalypse”, however, looking at the global nature of finance as it stands today, and the way all markets are interconnected and who the fall or rise of stocks in the U.S. affects, one should be more vested in the news of finances for one very good reason – those with modest investments, such as 401K’s, which are self-directed, could stand to lose, gain or hold onto their earnings. It is not that this blogger has any background in finances, except for losses in a 401K when the markets fell in 2008 – prompting a look at what was happening with high risk options, as well as safe options, in an effort to make gains on modest earnings, while holding onto the initial investment,

The U.S. Debt, for one is of concern, given the fact that the the Chinese own a huge percentage, along with Japan, the amount of the national debt owned by these two nations is at 42%(Desert News.). Paying down the national debt, attracting more businesses through tax incentives (cuts), and making cuts to unnecessary programs, would go a long way towards paying this debt down. It is the fact that, although a stable government, with an eye towards growth, one can anticipate China will have its ups and downs, along with all of its trading partners – one only needs to look Cyprus to see that global economics affect all nations to some extent.

Gold fell on the move by Cyprus to sell it’s gold to settle the national debt, this caused a 30 year low as investors panicked. The US stock market fell based on both the drop in Gold, and the reports on slow growth in Gina (Fox Business).

Expect the U.S. to rebound, as it is won’t to do- but keep an eye on the global markets, and rebalance your 401K accordingly – as most accounts offer features of safe, moderate, and aggressive options, one might want to move rebalance towards safe or moderate, leaving a smaller percentage in aggressive options – as a buffer over the next few months.

If one wants to know who invests in the stock market, those who hold 401K’s, pension funds by city, and state governments, private company pensions, and those whose earnings are not considered to be anywhere near the 1%.

Cyprus – Individuals Running Low on Cash to Pay Food Bills as Banks set to Reopen – Who’s next in Europe?

Protesters in Cyprus warn their European Neighbors - Image and article: Draconian Controls Cyprus Banks Set to Open UK news Yahoo

From Bloomberg News: After two weeks without access to banks, not to mention a depletion of 40% of one’s accounts, those living in Cyprus are running short on money to buy staples such as food, and are behind on paying bills, including rent. The banks, which are due to open today, has some residents skittish – as they fear crowds at the banks – The small nation, has the third smallest economy of those countries participating in the Eurozone. (Bloomberg).

Those that appear to be the cause and possibly next on the list for bank closures, frozen accounts and a raid on depositors accounts, both large and small, in order to pay off the national debt, are France, Spain and Italy, who have, according to Business Day Live, have weakened the Eurozone in the past month. (Business Day Live).

The nation to go down the Cyprus path is Spain and Slovenia, suggests Reuters. Although the Eurozone's economists are in somewhat of a disagreement as to how to handle each of the member nations crisis’, “the head of the Eurogroup of euro zone finance ministers Jeroen Dijsselbloem on Monday suggested the bailout could serve as model for dealing with future banking crises.”. That model was based on the nation of Cyprus freezing accounts and raising funds to cover a portion of their bailout through assessing a fee of 40% on each bank account.

How did this affect those in the U.S.? The The Global Markets “slipped” , meaning they took a loss based on the ongoing situation in the Eurozone and Cyprus. Those holding any investment vehicle in the U.S. (be it a pension, 401K, stocks, etc.) may be set to lose a portion of their investments should the situation continue. Additionally, one has to ponder the question, how much do the U.S. banks have invested in Eurozone nations?

As Socialist Europe finds it can no longer afford the long vacations, guaranteed pensions, guaranteed jobs, subsidized utilities, etc., nations, such as Cyprus will be forced to ask more of their citizens, (or basically just freeze accounts and help themselves) in order to save the national economy. There’s a lot to be said for a free market society, one which offers, rather than guarantees opportunity, and allows those who have, to give to those who have not, rather than allow the “State” to run programs. The obvious proof In the pudding is happening in Europe now, as well as in those U.S. cities struggling to pay debts due to mismanagement and hyper inflated pensions and benefits to those unionized employees – Detroit, Honolulu, Chicago, Cincinnati, San Diego, San Jose and San Francisco to name a few (Four Winds) In the U.S. these cities problems can also be attributed to the economic downturn in the U.S., but when there is an indication of problems, most politicians, from the local level to the Federal, prefer to “kick the can down the road”. Time for fiscal restraint in both the U.S. and abroad – Should this trend continue those affected most (as in Cyprus) are not the very rich, but those that depend upon the government for their very basic needs.