For some reason, Turkey still wishes to join the EU. The Eurocrats would be wise to speed up the Turks’ accession talks. With the current rate of economic decay, the EU is transmogrifying into the sick man of the world, and it will be difficult to attract new members.
Turkey is more developed than many of those Eastern European countries that are on the fast track to EU membership. Yet, Turkey has been clamoring for membership since 1987 with talks only commencing in 2005. What holds the process back? Countries like France with huge, unassimilated Muslim communities are wary of allowing another 80mm or so Muslims into Europe. Liberté, égalité and fraternité for all.
Turkey’s economy is more developed than both those of Bulgaria and Romania as our chart above clearly indicates. What are chart does not indicate is that Turkey has been a democratic country for much longer than both of the aspiring Balkan members to the EU. There is an ethnic component to delaying Turkish EU membership, but the country does itself no favors with its government’s authoritarian tendencies.
This is what happens when the Fed manipulates a market. Housing prices are rising in bubblicious areas such as L.A., but rents are not moving much indicating that the demand for housing of all types is stagnant. The exception is the New York metro area which is witnessing huge rent increases that belie a stagnant housing market. Cheap Fed money has put cash into the pockets of speculators and increased the fortunes of TBTF banks; hence, we observe price increases in speculator friendly markets in the West particularly in L.A., Silicon Valley, Las Vegas and Phoenix and rent increases in New York where young professionals have decent job prospects due to the TBTF banks.
The problem with the housing market is that the price increases are not organic resulting the normal functioning of supply and demand. New household formation and wage growth are insufficient to spur demand, so the Fed has resorted to printing money to increase demand on its own in the hopes that the “recovery” will become self-sustaining. It won’t.
Despite the mainstream media’s slavish devotion to its housing recovery narrative, the factors supporting growth are absent. Mortgage rates are rising, wages are stagnating, and household formation remains at postwar lows. It seems that the Bernanke Bubble will suffer the same fate as the Greenspan Bubble seven years earlier.
Allow me to save you time on the latest pronouncement by the Bank of International Settlements, the central bank to the central banks. Basically, at this late juncture the BIS is telling us that there is a bond bubble growing within the world. Astute readers of Dareconomics and anyone who can read the chart above have been aware of the Bernanke Bond Bubble quite some time:
While BIS statement is couched in conditional language, there is nothing conditional about a bubble. They always burst.
Perhaps the real story of the past couple of months is not the Fed’s taper but the PBOC’s tightening. In addition to allowing short-term interbank rats to rise, the Chinese also began cracking down on the copper trade that allowed for massive credit creation. The disappearance of liquidity from the system began adversely affecting markets on May 2, while the Fed’s taper talk did not start in earnest until the 22nd. With the PBOC backtracking on its plan in recent days, look for a recovery in asset prices lasting through the end of the month.