As promised, I’m back to guide you through the fascinating nuances of world economics, AEP style (that’s Ambrose Evans-Pritchard, my muse for all things monied…)

The title of the second article was … wait for it …

Stocks to soar as world money catches fire, Calvinst Europe left behind

(Notice he left out the second “i” in Calvinist – budget cuts eliminated editors, eh?)

So the thesis of this article is as follows:

We have a new acronym to add to our economic lexicon: NGDP. That stands for nominal GDP targeting, or as it was known during the Great Depression: “beggar thy neighbor”. I wrote about this a long time ago in the “Economics and Investing” section. Check that out for a brush up on how Hitler got Germany out of the throes of the Depression, and became a mad, sad monster afterward because, like Billy Mumy in that Twilight Zone episode, “It’s a Good Life”, everybody was afraid to tell him “NO”…

So what’s that to do with AEP’s article? Surprisingly, a lot.

The US, China, Japan, Switzerland, and the Scandinavian countries are all adopting different varieties of loose money policies in an attempt to either devalue or stabilize their currencies. In the process, it’s like a game of musical chairs, and the poor cousins of the European Union are going to be the chairless ones. Their adoption of the austerity policies foolishly and ruthlessly required by the rich cousin (Germany) will have the potential to spark a rebellion. Although AEP is not one to predict the where or when of such a thing, looking at the statistics of unemployment in Spain, Greece, Portugal and Italy, there’s every potential for revolt. Will it be the western version of what used to be called the “Arab Spring”? Not likely…

What he’s alluding to is exactly what I described in that piece about the rise of Hitler. And he doesn’t spare France from his doomsday scenario, invoking the name of Marine Le Pen, a right-wing French nationalist who came in third in the election that produced Francois Hollande. What’s to be concerned about there? Anti-immigrant, proponent of the strong French franc (versus the Euro…) Ambrose is intimating that the spark could originate with France. And a Woman… Wow.

So why is the headline of the article saying “Stocks to soar..” as the subject?

This references the same concern as yesterday’s article regarding the bonds held by banks reflecting the sovereign debt of that country. Those bonds were priced for a deflationary period. If the attempts to devalue these stronger nation’s currencies is effective, those bonds will be significantly reduced in value, further causing problems for the poorer countries. The short term effect will be a rush to equities to avoid that pitfall on the part of world-wide investors. Isn’t this good news?

Not if you’re looking long term and expecting a return to global stability and improved world trade – the driver of world-wide prosperity. As a point of fact, AEP essentially calls it the plateau before the next big drop. Ouch…

What’s a little investor to do? Ride the wave while it lasts, don’t buy any sovereign debt (or a Rolex watch from a street vendor) and be prepared to see the potential for another Hitler to rise from those same phoenix ashes we talked about yesterday. When? Only The Shadow knows…