The collapse of the celebrated Lehman Brothers on September 15 2008 signalled the maturation of the sub-prime crisis in the US to global economic meltdown via financial meltdown. If we discount the routine predictions of inevitable doom from the Left with predictable regularity, no one had seen it coming. (To be fair, one stray voice of a Professor from the New York University - Nouriel Roubini, was the sole exception. He had made some predictions as regards forthcoming American economic crisis in 2005/6. That's all, as it looks.) In the wake of the collapse started pouring in a barrage of doomsday predictions - predictions of a crisis comparable to that of the Great Depression, if not surpassing that. Again surprising and belying almost everyone, things started looking up in about a year's time. But the "recovery", to be sure, is still tentative and remains on shaky ground.
While some are calling for more "stimulus", trashing the neo-liberal orthodoxy privileging "fiscal responsibility" over all other socio-economic considerations – heavy state investments in infrastructure building, in particular – in order to give the economy a much needed further push; here is a doomsday prediction, once again. It is not easy to make sense of the stray technical jargons culled from a lengthy advisory issued by one of the oldest banks in France. The essential message, however, looks to be that the most likely wage of the sin of committing fiscal profligacy, as has been resorted to in the immediate past to mitigate and reverse the "crisis" – causing huge debt burdens, is another impending crisis, nay, collapse. Sukla http://www.telegraph.co.uk/finance/economics/6599281 /Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html Société Générale tells clients how to prepare for potential 'global collapse' *Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.* By Ambrose Evans-Pritchard Published: 6:12PM GMT 18 Nov 2009 In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems. Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years. "As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast. Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010. Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade. (UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case). The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said. Inflating debt away might be seen by some governments as a lesser of evils. If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s. The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time. SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar. Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons. SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis. Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said. -- Peace Is Doable -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To post to this group, send an email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/greenyouth?hl=en-GB.
