Ambrose Evans-Pritchard here writes off 2009 already so perhaps I’ll
go back to bed right now. On the other hand, meanwhile I’m
savouring the frustrated rage of the Anti-American left-wing Guardian
readers and BBC executives.
xxxxxxx cvs
=========================
TELEGRAPH 5.1.09
US will emerge as undisputed top dog in 2009
Interest rates near zero across the G10 bloc will prevent a replay of
the Great Depression, but they will not pull us quickly out of the
doldrums, writes Ambrose Evans-Pritchard.
Central banks will do whatever it takes to combat debt deflation.
Even Frankfurt will join the rush to print money, buying every form
of debt from mortgages to corporate bonds.
The Fed will follow the Bank of Japan in propping up stock markets.
Puritans will grumble, but the surprise will be how it long takes for
this stimulus to gain traction. We will learn the term "pushing on a
string".
Western societies will feel the first shivers of raw fear as people
twig that the authorities are not in control. Iceland's winter will
set an awful example. Job losses will reach 1m a month in the US at
the point of peak pain.
Economists know this is a late-cycle effect – darkest before dawn –
but the public will see it otherwise. This will be the phase that
shakes society.
The geopolitical landscape will look different. Cohesive states with
a rule of law and old democracies – the Anglosphere, Holland, France,
Scandies – will muddle through. They will start to enjoy a political
premium in investor psychology, despite horrendous debts.
Obama's America will shine. The country will reemerge as undisputed
top dog, the only one with real demographic, scientific, and
strategic depth. As first into the crisis, it will be the first to
hit bottom. Those expecting the dollar to collapse will have to
wait. [The howls of rage at this from the anti-Americans will be
muted by the desire to cuddle up to Obama who will not gain power
until after the die is cast! -cs]
The damage to core Europe will take longer, but run deeper. Belgium
will face a break-up scare. Markets will test highdebt states as they
try to roll over bonds – €200bn (£191bn) for Italy and €40bn for
Greece. Spain's corporate debts will turn bad.
Germany's economy will contract by 3pc as exports collapse, and the
delayed effects of the strong euro and tight money feed through.
Angela Merkel's Left-Right coalition will be haunted by its failure
to tackle the crisis earlier. The neo-Marxist Linke party and the
hard-Right will muscle in. The country will start to look
ungovernable. This will at least divert attention from the Club Med
mess, making a North-South split in the eurozone less likely. After
sterling's sudden death, the euro will face slow death. The pair will
refind their accustomed level.
Authoritarian regimes will fare badly. Those that depend on perma-
boom to hold power will fray. Repression will escalate in China as an
inflammatory cocktail of migrant workers and jobless graduates vent
their anger in riots. Massive fiscal spending will buy time.
The Kremlin will not have that option. Oil at $40 (£28) a barrel will
expose the insolvency of the Russian state, forcing spending cuts.
Anti-Kremlin marches will evolve into a simmering rebellion, setting
off pitched battles with police.
Analysts will be shocked by the ferocity of the downturn across Asia,
where the strategy of export-led growth will be called into question.
It will become clearer that Asia's boom has been a leveraged play on
the West, and leverage works both ways. Some Pacific tigers will try
to resist the denouement by holding down currencies. Such beggar-thy-
neighbour policies will lead to tit for tat responses. The US and
Europe will tire of holding the ring for free trade. The WTO will
look ever more like the League of Nations.
By late 2009, the massive monetary and fiscal stimulus will feed
through. Angst will start to switch from deflation back to the risk
of incipient inflation. Equities, oil, and gold will rally. Bonds
will falter, and then crash.
At that point it will become clear that reflation is just as
dangerous as deflation in a world of debt. We will find that there is
no way out. But that, perhaps, can wait until 2010
go back to bed right now. On the other hand, meanwhile I’m
savouring the frustrated rage of the Anti-American left-wing Guardian
readers and BBC executives.
xxxxxxx cvs
=========================
TELEGRAPH 5.1.09
US will emerge as undisputed top dog in 2009
Interest rates near zero across the G10 bloc will prevent a replay of
the Great Depression, but they will not pull us quickly out of the
doldrums, writes Ambrose Evans-Pritchard.
Central banks will do whatever it takes to combat debt deflation.
Even Frankfurt will join the rush to print money, buying every form
of debt from mortgages to corporate bonds.
The Fed will follow the Bank of Japan in propping up stock markets.
Puritans will grumble, but the surprise will be how it long takes for
this stimulus to gain traction. We will learn the term "pushing on a
string".
Western societies will feel the first shivers of raw fear as people
twig that the authorities are not in control. Iceland's winter will
set an awful example. Job losses will reach 1m a month in the US at
the point of peak pain.
Economists know this is a late-cycle effect – darkest before dawn –
but the public will see it otherwise. This will be the phase that
shakes society.
The geopolitical landscape will look different. Cohesive states with
a rule of law and old democracies – the Anglosphere, Holland, France,
Scandies – will muddle through. They will start to enjoy a political
premium in investor psychology, despite horrendous debts.
Obama's America will shine. The country will reemerge as undisputed
top dog, the only one with real demographic, scientific, and
strategic depth. As first into the crisis, it will be the first to
hit bottom. Those expecting the dollar to collapse will have to
wait. [The howls of rage at this from the anti-Americans will be
muted by the desire to cuddle up to Obama who will not gain power
until after the die is cast! -cs]
The damage to core Europe will take longer, but run deeper. Belgium
will face a break-up scare. Markets will test highdebt states as they
try to roll over bonds – €200bn (£191bn) for Italy and €40bn for
Greece. Spain's corporate debts will turn bad.
Germany's economy will contract by 3pc as exports collapse, and the
delayed effects of the strong euro and tight money feed through.
Angela Merkel's Left-Right coalition will be haunted by its failure
to tackle the crisis earlier. The neo-Marxist Linke party and the
hard-Right will muscle in. The country will start to look
ungovernable. This will at least divert attention from the Club Med
mess, making a North-South split in the eurozone less likely. After
sterling's sudden death, the euro will face slow death. The pair will
refind their accustomed level.
Authoritarian regimes will fare badly. Those that depend on perma-
boom to hold power will fray. Repression will escalate in China as an
inflammatory cocktail of migrant workers and jobless graduates vent
their anger in riots. Massive fiscal spending will buy time.
The Kremlin will not have that option. Oil at $40 (£28) a barrel will
expose the insolvency of the Russian state, forcing spending cuts.
Anti-Kremlin marches will evolve into a simmering rebellion, setting
off pitched battles with police.
Analysts will be shocked by the ferocity of the downturn across Asia,
where the strategy of export-led growth will be called into question.
It will become clearer that Asia's boom has been a leveraged play on
the West, and leverage works both ways. Some Pacific tigers will try
to resist the denouement by holding down currencies. Such beggar-thy-
neighbour policies will lead to tit for tat responses. The US and
Europe will tire of holding the ring for free trade. The WTO will
look ever more like the League of Nations.
By late 2009, the massive monetary and fiscal stimulus will feed
through. Angst will start to switch from deflation back to the risk
of incipient inflation. Equities, oil, and gold will rally. Bonds
will falter, and then crash.
At that point it will become clear that reflation is just as
dangerous as deflation in a world of debt. We will find that there is
no way out. But that, perhaps, can wait until 2010
Posts
