Thanks for this Harry.
I think a lot of people,including me , were fooled into thinking the annus horribilis would be 2009 . What we didn't realise was that the sheer gargantuan scale of the "stimulus" packages (QE,more borrowing,tax cuts,spending increases) around the world would put off the final denouement of the global ponzi scheme for another year or so .
Ironically this delay could save the one-eyed Scottish idiot from a richly deserved election wipe-out , but it won't save the country from what looks like an unprecedented disaster.
Two leading strategists at Soc Gen (Albert Edwards and another) forecast recently that the Western World would suffer a total fiscal meltdown in 2011, and I think they are right.
What it boils down to is that the money will simply run out . It will either be unavailable altogether for the worst sovereign (not to mention corporate) credit -risks , but the interest rates will be much higher. Ordinary people will be unable to get credit at any price.A former chief economist at the IMF has forecast a year or so back that mortgages will revert in short order to around 10%p.a..
At the same time, the resulting collapse in demand will mean no inflation and probably deflation , leading to lower wages ( Roger Bootle, an economist I follow closely, forecasts this).
Obviously this will mean a huge wave of personal and corporate bankruptcies, falling house prices and general destitution - followed by social unrest like the 1930s.
This is the final collapse of what I call the ersatz capitalism invented at Bretton Woods in 1944. We need to get back to proper capitalism - recessions where bad businesses routinely go to the wall and the freed capital is properly recycled ; balanced Budgets, no inflation ; get the Government off business's back; and actually apply proper bank regulation, like the Bank of England used to do.
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