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Peter Hun

Recession Lasting Until 2018

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Someone has the balls to say it.

In an era where forecasts by permabears have gotten ample attention and vindication, few are as disturbing as this: a world recession until 2018.

It comes from Eisuke Sakakibara, Japan’s former top currency official. He is known as “Mr. Yen” for his ability to move markets. Because Tokyo’s revolving-door politics often sends a new face to each Group of 20 meeting, he is one of the few Japanese constants in market circles. Traders may not know the latest finance minister’s name, but they know Sakakibara.

Japan is the master of muddling along, decade after decade, with little growth to show for it. And Sakakibara was a key player when Japan faced everything from the Asian crisis to Russia’s default to the onset of deflation to a banking collapse that saw the demise of Yamaichi Securities Co.

So, when an economist with Sakakibara’s background says “the world is set for a long-term structural slump reminiscent of the 1870s” when average global annual growth was about 1 percent, I can’t help but listen. The reason for the slowdown? Governments are putting fiscal austerity ahead of restoring stable growth.

Yes, there’s an eye-rolling quality to a former Finance Ministry mandarin giving economic advice. After all, officials there did Japan’s 126 million people a disservice by punting reform far down the road. They just borrowed and borrowed, leaving Japan with the largest public debt among industrialized nations and no exit strategy in sight.

Global Recession

Yet recent data in the U.S. and Japan and financial turbulence in Europe suggest a fresh global recession is a distinct possibility in 2011. If that happens, what levers are realistically available to revive demand? Interest rates are already at, or close to, zero. That leaves increased government spending as the only real way to stabilize things.

The trouble is, there’s little support for opening the fiscal floodgates in a meaningful way.

One reason is that there’s already loads of public debt out there. As of June, Japan’s $5 trillion economy had 904 trillion yen ($10.8 trillion) in debt outstanding. Too much debt is wreaking havoc in Europe, where Ireland was the latest domino to fall.

The U.S. is starting to rattle bondholders with its borrowing binge. President Barack Obama’s stimulus isn’t working the magic economists hoped. Neither is the Federal Reserve, as it goes the way of Japan with quantitative easing.

1937 Again

Worse, in the U.S. and other major economies, is the risk that it may be 1937 all over again. It was then that President Franklin Delano Roosevelt got stingy with stimulus, assuming that the Great Depression was over. The next year saw the economy in full retreat.

If Sakakibara is right, the global economy is in deep trouble. He envisions a broad slowdown that might drag on for seven to eight years. China can live a couple of years without U.S. and European growth, but eight?

To head it off, governments need to up spending. And, for the most part, they aren’t. Yet the U.S. can, and should, borrow more. To do that, it just needs to become a bit more Japanese, says Richard Duncan, author of the “The Corruption of Capitalism.”

There’s a single reason why Japan’s 10-year bond yields are below 1.3 percent and Asia’s No. 2 economy isn’t being downgraded. Since about 95 percent of Japan’s debt is held domestically, there’s no risk of capital flight. Japan borrows from its companies and people, an arrangement that’s roughly the mirror image of the U.S.

New, New Deal

That so many Treasuries are held in China and elsewhere makes the U.S. highly vulnerable. Duncan, chief economist at Blackhorse Asset Management Pte. in Singapore, says the U.S. needs another FDR-like New Deal to restore growth and competitiveness. Funding one means greater borrowing and the way to do it is by tapping private-sector cash, Japan-style.

Such suggestions are likely to fall with a mighty thud on Capitol Hill, which is moving in the opposite direction. Lawmakers calling for Ben Bernanke’s head forget why the Fed chairman is taking U.S. monetary policy into uncharted territory. It’s because Congress failed to pump enough money into the economy in the first place.

Japan is a cautionary tale. On the surface, the 4.5 percent annualized increase in third-quarter gross domestic product looked promising. The detail, however, showed that deflation is worsening no matter how many yen the Bank of Japan churns into the economy. This is anything but a typical recession, and world leaders are too distracted to see it.

In the U.S., the focus is on China’s currency. While a stronger yuan would be in the best interests of the global economy, it’s not the answer to all the U.S. problems. Japan is even more obsessed with exchange rates. And Europe is linearly focused on convincing investors that the euro zone won’t unravel.

In our time of currency fixation, perhaps a guy called Mr. Yen is the ideal messenger. Too bad his message is one of economic gloom as far as the eye can see. Perhaps even to 2018

http://www.bloomberg.com/news/2010-12-12/recession-lasting-until-2018-worth-exploring-commentary-by-william-pesek.html

Edited by Peter Hun

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Fiscal stumuli only work when there is future growth on the horizon to make good on all the money from future production that a stimulus draws down.

There will be no future growth.

We have hit peak-global-resources around 2007. Our economies will not recover but will, instead, inexorably contract. Pushing more state-sanctioned units of exchange into the world economy will not change the above inevitable process. All that it will do is casue us to end up having to pay more units of exchange for the same amount of goods and services.

Western hydrocarbon-based industrial civilisation has peaked and is now set on a course of inexorable decline. We just haven't come to terms with it yet.

Edited by tallguy

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Only if you let it get to you.

Aye, Looking forward to saving and increasing my personal wealth. This gives me more time to invest in depressed assets before the next credit boom.

Western hydrocarbon-based industrial civilisation has peaked and is now set on a course of inexorable decline.

I'm not certain the lack of oil will prevent the next boom (which is a change in stance from me), the abundance of fractured gas will compensate before alternatives take hold.

Limits on credit will drive the recession and that will take a ten year crash to pay down the debt overhang.

Edited by Peter Hun

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Wouldn't an 8 year recession be a depression?

Hoping for an 8 year depression could be rather optimistic. Depressions can take years to work through the system. The last one appears to have run from 1929 to about 1955. Having this one run from say 2008 to 2018 would be quite an achievement.

Luckily that won't happen as we are in the midst of the great recovery.

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Hoping for an 8 year depression could be rather optimistic. Depressions can take years to work through the system. The last one appears to have run from 1929 to about 1955. Having this one run from say 2008 to 2018 would be quite an achievement.

Luckily that won't happen as we are in the midst of the great recovery.

This isn't a recession or even a depression.

It's the end of empire

Edited by tallguy

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Fiscal stumuli only work when there is future growth on the horizon to make good on all the money from future production that a stimulus draws down.

There will be no future growth.

We have hit peak-global-resources around 2007. Our economies will not recover but will, instead, inexorably contract. Pushing more state-sanctioned units of exchange into the world economy will not change the above inevitable process. All that it will do is casue us to end up having to pay more units of exchange for the same amount of goods and services.

Western hydrocarbon-based industrial civilisation has peaked and is now set on a course of inexorable decline. We just haven't come to terms with it yet.

Agree 100%

Pretty hard to grow an economy with limited petroleum inputs - and they will become limited.

We are not going to simply change our built enviroment and convert all our cars to run on Gas in the next couple of years.

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Aye, Looking forward to saving and increasing my personal wealth. This gives me more time to invest in depressed assets before the next credit boom.

I'm not certain the lack of oil will prevent the next boom (which is a change in stance from me), the abundance of fractured gas will compensate before alternatives take hold.

Limits on credit will drive the recession and that will take a ten year crash to pay down the debt overhang.

There is an old journalistic maxim which states; "follow the money" if you want to know the heart of a story. However, since money is merely the final abstract representationb of all of the work done by man and since all of the work done by man is an abstraction of all of the resources used by man and since FRB is a means by which we draw down the fruits of our expeceted future production this maxim is really derivative as opposed to axiomatic. In which case we should really follow the resources. In particular, the most fundamental resource of all, energy.

Given the above, where do you think credit comes from?

Why do you think it is drying up?

Despite appearances, banks aren't stupid. Just greedy.

Edited by tallguy

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Ive always said recovery will happen (ie unemployment falling, purchasing power rising, not the GDPcrap) when boomers stop retiring on a large scale and start dieing on a large scale.

Need to roll out a new batch of MRSA and C.Diff to the NHS, that should help get the HPC on the road.

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Agree 100%

Pretty hard to grow an economy with limited petroleum inputs - and they will become limited.

We are not going to simply change our built enviroment and convert all our cars to run on Gas in the next couple of years.

We could easily cut back on our petroleum usage if we changed our attitudes. A significant portion of what people spend time working to earn money for buy is just cr@p that ends up in land fill.

Women often say men are the dangerous sex of the species, fair enough, we do like to start the odd war, but I think women will be the end of us, as it seems to be the women that are the driving force behind global trade (and therefore oil consumption and pollution), because they are the ones buying all the clothes, shoes, tat, easter eggs, birthday/xmas cards, presents, coffee in the coffee shops etc.

I'm pretty damn sure that if women didn't exist birthdays and xmas would immediately cease to exist too, creating a much more stress-free and environmentally friendly end to the year. But what about the fall in trade you say? F4ck it, no need to work for 5 days a week, just do 3 and spend the extra 2 on the playstation (or fishing or whatever floats your boat).

Women - the reason you have to work 5 days a week!

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We could easily cut back on our petroleum usage if we changed our attitudes. A significant portion of what people spend time working to earn money for buy is just cr@p that ends up in land fill.

Women often say men are the dangerous sex of the species, fair enough, we do like to start the odd war, but I think women will be the end of us, as it seems to be the women that are the driving force behind global trade (and therefore oil consumption and pollution), because they are the ones buying all the clothes, shoes, tat, easter eggs, birthday/xmas cards, presents, coffee in the coffee shops etc.

I'm pretty damn sure that if women didn't exist birthdays and xmas would immediately cease to exist too, creating a much more stress-free and environmentally friendly end to the year. But what about the fall in trade you say? F4ck it, no need to work for 5 days a week, just do 3 and spend the extra 2 on the playstation (or fishing or whatever floats your boat).

Women - the reason you have to work 5 days a week!

ooh, absolutely

Take a look at your average high street. If men did the shopping, how many shops would be there? HMV, pick one mobile phone shop, pick one gadget shop (dixons/ curry etc), Marks n Sparks for clothes/shoes, WHSmiths for the paper and maybe a branch of Boots for manflu remedies. All the rest of the shite is bought by women - tablecloths, sideboards, lampshades, dishwashers (men would use paper plates or at least reduce the washing up to manageable proportions), scented ******ing candles, happy whatever day cards, 200 racks of ******ing dresses etc etc. Always been said that while it's a disgrace that men earn more than women, the reality is that whoever earns it, it's women who spend it.

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HMV, pick one mobile phone shop, pick one gadget shop (dixons/ curry etc)

Anyone who still buys DVDs/Blurays or electronics in high street stores deserves those rip-off prices. A real man buys on-line.

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Anyone who still buys DVDs/Blurays or electronics in high street stores deserves those rip-off prices. A real man buys on-line.

true, and then spends 2 hours queueing at the sorting office to retrieve his parcels.

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When does systematic collapse and/or rise of right wing nationalistic parties come ?

BNP+UKIP already get something like 4-5% of the vote despite being lunatic-ridden flypaper for stupid.

What would happen if you had a party which advocated economic nationalism, sharply restricted immigration (i.e. revocation of EU treaties involving same) and a strong domestic stimulus program is anyone's guess.

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We could easily cut back on our petroleum usage if we changed our attitudes. A significant portion of what people spend time working to earn money for buy is just cr@p that ends up in land fill.

Women often say men are the dangerous sex of the species, fair enough, we do like to start the odd war, but I think women will be the end of us, as it seems to be the women that are the driving force behind global trade (and therefore oil consumption and pollution), because they are the ones buying all the clothes, shoes, tat, easter eggs, birthday/xmas cards, presents, coffee in the coffee shops etc.

I'm pretty damn sure that if women didn't exist birthdays and xmas would immediately cease to exist too, creating a much more stress-free and environmentally friendly end to the year. But what about the fall in trade you say? F4ck it, no need to work for 5 days a week, just do 3 and spend the extra 2 on the playstation (or fishing or whatever floats your boat).

Women - the reason you have to work 5 days a week!

Got it.

I'll be cutting my hours to 12.5 per week come January, the wife works 36 (three 12 hour shifts)

It's nature's way!

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We could easily cut back on our petroleum usage if we changed our attitudes. A significant portion of what people spend time working to earn money for buy is just cr@p that ends up in land fill.

Women often say men are the dangerous sex of the species, fair enough, we do like to start the odd war, but I think women will be the end of us, as it seems to be the women that are the driving force behind global trade (and therefore oil consumption and pollution), because they are the ones buying all the clothes, shoes, tat, easter eggs, birthday/xmas cards, presents, coffee in the coffee shops etc.

I'm pretty damn sure that if women didn't exist birthdays and xmas would immediately cease to exist too, creating a much more stress-free and environmentally friendly end to the year. But what about the fall in trade you say? F4ck it, no need to work for 5 days a week, just do 3 and spend the extra 2 on the playstation (or fishing or whatever floats your boat).

Women - the reason you have to work 5 days a week!

If women didn't exist?

That would be like the navy in days of old.

I'm guessing the demand for accordians and rum would rise.

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So, when an economist with Sakakibara’s background says “the world is set for a long-term structural slump reminiscent of the 1870s” when average global annual growth was about 1 percent, I can’t help but listen. The reason for the slowdown? Governments are putting fiscal austerity ahead of restoring stable growth.

Perhaps it was mistranslated? I am sure that will apply to the developed world. The emerging world is doing just fine. Or does this means Emerging world at +4% and developed world -3% pa ?

One reason is that there’s already loads of public debt out there. As of June, Japan’s $5 trillion economy had 904 trillion yen ($10.8 trillion) in debt outstanding. Too much debt is wreaking havoc in Europe, where Ireland was the latest domino to fall.

China might be interested to buy a few islands off Japan?

If Sakakibara is right, the global economy is in deep trouble. He envisions a broad slowdown that might drag on for seven to eight years. China can live a couple of years without U.S. and European growth, but eight?

Africa is starting at such a low based that there is huge amount of opportunity to grow. And yes, China is there.

That so many Treasuries are held in China and elsewhere makes the U.S. highly vulnerable. Duncan, chief economist at Blackhorse Asset Management Pte. in Singapore, says the U.S. needs another FDR-like New Deal to restore growth and competitiveness. Funding one means greater borrowing and the way to do it is by tapping private-sector cash, Japan-style.

The correct statement is most Treasuries are held electronically at Federal Reserve computer in New York in accounts belongs to the Chinese/German/Japanese.

And oh..the highly paid chief economist appeared to have no solution either than devaluation and piling up government debt? Not sure whether he remembered

what really took US out of the depression was WW 2 (as massive capex program to destroy all your competitors capacities, albeit involuntarily).

Japan is a cautionary tale. On the surface, the 4.5 percent annualized increase in third-quarter gross domestic product looked promising. The detail, however, showed that deflation is worsening no matter how many yen the Bank of Japan churns into the economy. This is anything but a typical recession, and world leaders are too distracted to see it.

Japan's deflation in certain sectors (certainly not in things like food and fuel) will be over when the prices were allowed to fall to market clearing level. The Japanese just chose to do it over a long period of time (while Iceland decided to do it the quick ways).

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ooh, absolutely

Take a look at your average high street. If men did the shopping, how many shops would be there? HMV, pick one mobile phone shop, pick one gadget shop (dixons/ curry etc), Marks n Sparks for clothes/shoes, WHSmiths for the paper and maybe a branch of Boots for manflu remedies. All the rest of the shite is bought by women - tablecloths, sideboards, lampshades, dishwashers (men would use paper plates or at least reduce the washing up to manageable proportions), scented ******ing candles, happy whatever day cards, 200 racks of ******ing dresses etc etc. Always been said that while it's a disgrace that men earn more than women, the reality is that whoever earns it, it's women who spend it.

Thank heaven for the pink pound! laugh.gif

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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