Friday, Jan 30, 2009
S&P 500 faces a 40% slump
MoneyWeek: S&P 500 faces a 40% slump
In short, what most pundits don't seem to realise is that this isn't just a nasty recession. It's a deflationary credit-bubble collapse, and with inflation already heading for zero, a Japan-style slump is a real possibility.
Posted by damien @ 10:10 AM (425 views) Add Comment
5 Comments
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1. stillthinking said...
I don't think it is necessarily known that the UK will have a Japan-style slump, for example, we might collapse entirely should there be a gilt strike. We might have to go to the IMF. Basically, we might not do as well as Japan's lost decade(s). In Japan M3 did genuinely collapse, at the moment in the UK we have a demand collapse which may or may not lead to the same thing. There is a lot of borrowing going on by the government.
2. japanese uncle said...
I would say things are much worse here today than the collapse of the Japanese bubble in 1990, for the reasons as follows:
(i) The starting point for this economy, even if any recovery is in sight, should be minus 1.5 trillion personal debt, let alone government deficit.
(ii) UK economy is riddled with the disproportionate financial burden caused by the failed reckless speculations committed with the truly 'global' scale (US sub-prime market, emerging markets including Dubai whose unfinished skyscrapers increasingly look like a stupid joke these days) by the megalomaniac psychopaths in the City including 'Sir' Freddie from Elm Street, simply because those institutions under their control happen to be incorporated/headquartered in this country.
(iii) No alternative value adding engine is available to this economy that can even remotely plug the void caused by the now collapsing financial non-businesses.
3. stillthinking said...
JU, for (iii),that is surely the same argument espoused on "cynicus economicus" (very good mainly), and also Jim Rogers. There is nothing to replace the financial services industry (and North Sea oil). In which there cannot be a recovery in the medium term because there is nothing to recover and we all become poorer. In fact we are all becoming poorer now, with announcements of future poverty to look forward to.
I read an article in the mainstream Irish press and I was astounded by their mainstream view to cut back on pretty much everything. Great idea.
4. letthemfall said...
I can never quite understand what all this wealth the financial sector purported to create actually is. If you listen to the bankers they say it is about allocating money to wealth creating enterprises - widget manufacturers, poodle parlours, whatever. But they seem mainly to have funnelled foreign cash into unproductive bubble creation (slicing off their absurdly large fees first of course). Getting people producing something useful is the answer, except the country looks like being paralysed by debt.
5. letthemfall said...
I can never quite understand what all this wealth the financial sector purported to create actually is. If you listen to the bankers they say it is about allocating money to wealth creating enterprises - widget manufacturers, poodle parlours, whatever. But they seem mainly to have funnelled foreign cash into unproductive bubble creation (slicing off their absurdly large fees first of course). Getting people producing something useful is the answer, except the country looks like being paralysed by debt.