Prudent Bear says, "No recovery for you!" Excerpt:
At some point, probably before the end of 2010, the bubble will burst. The deflationary effect on the U.S. economy of $150 plus oil will overwhelm the modest forces of genuine economic expansion. The Treasury bond market will collapse, overwhelmed by the weight of deficit financing. Once again, the banking system will be in deep trouble. The industrial sector, beyond the largest and most liquid companies and the extractive industries, will in any case have remained in recession - it is notable that, in spite of the Fed's frenzy of activity, bank lending has fallen $600 billion in the last year. Unemployment, which will probably enter the second downturn at around current levels, will spike further upwards. The dollar will probably not collapse, but only because it will have been declining inexorably in the intervening year, to give a euro value of $2 and a yen value of 60 to 65 yen to the dollar.In the next downturn, the Fed will not be able to cut interest rates, because inflation will be spiraling, as in 1980. Instead it will need to raise them while dealing with a profound crisis in the bond markets. Capital in the U.S. will become still more difficult to come by, and unemployment will approach 15%. The U.S.'s only saving graces will be that the inflation will have prevented much further decline in the nominal prices of houses, while the decline in the dollar will have finally swung the payments deficit towards balance. U.S. real wages will be forced downwards by high unemployment, while banks' relief on the home mortgage front will be balanced by a tsunami of collapsed credit card debt and other consumer debt.
2011 and 2012 will be very unpleasant years, as the Obama administration struggles to get closer to budget balance without pushing up taxes so far as to cause yet a third recession. Stock prices will be at or below their March 2009 lows, and will stay there even as earnings of export-oriented companies will be robust. (Conversely, retailers dealing in cheap imported goods, such as Wal-Mart, will be devastated.) Wages will be generally declining relative to prices, although may show some growth in nominal terms as inflation will be considerable. Foreign goods and services will be inordinately expensive in dollar terms.
Damn! I'm going to have to drink my way through the Apocalypse on domestic wine and spirits.
Add to Del.icio.us
Add to Technorati
Add to Digg
Add to Newsvine
Add to Facebook
Add to StumbleUpon
Subscribe
Add to the "Next Scary Thing" the commercial real estate market which is predicted by some to be a bubble on the verge of massive collapse. LOL - I do think no one really knows what is going to happen. And most economists - certainly Krugman - keep saying we are in uncharted territory. Re: $150 oil - I'd bet the economy would drop back into full blown recession well before oil got that high - it would seem $100 a barrel (which at our pace of use represents 25% of GDP - now there is really something scary) is enough to create recession.
Serious Inflation won't start til consumption starts up again and wages increase - there is little sign of that happening.
Finally - the dollar. People keep talking bout how the dollar's value will collapse - if that happens - then of course other currencies increase in value - the Euro, the Chinese, the Yen etc. If their currencies increase - their economies nosedive - because all that stuff they make and sell to us - now gets too expensive. Low dollar - massive unemployment in China. Suspect the Chinese do not want that.
The one thing clear to me is - there are no prophets.
Re: In the next downturn, the Fed will not be able to cut interest rates, because inflation will be spiraling
Yes, and it will snow in July in Miami, and water will run uphill. Really, the whole passage sentence bespeaks of incredible economic ignornace. "Downturn "and inflation"do not belong in the same sentence, esepcially not when the writer earlier refers to "deflationary pressure". A tarot card reader would be more reliable to predict next year's economy!
Re: Add to the "Next Scary Thing" the commercial real estate market which is predicted by some to be a bubble on the verge of massive collapse.
We've been hearing this about the commercial real estate market for over a year now. Something to note: it's a much smaller market than residential, and it routinely goes through cycles of boom and bust which have rather little effect on the larger economy.
I guess since most wine improves with age, it wouldn't hurt to stock up now...
What? You mean going into more national debt for Obama's nearly trillion-dollar "Stimulus" WON'T work??
In America first thing of mens need is bear but from this there is so much less make to governments.By drinking this some people can lost mind and not goes at office and that day's work are become pending.
r4i software
Post a Comment
By submitting these comments, I agree to the beliefnet.com terms of service, rules of conduct and privacy policy (the "agreements"). I understand and agree that any content I post is licensed to beliefnet.com and may be used by beliefnet.com in accordance with the agreements.