LewRockwell.com: Global Bear Rally Will Deflate as Japan Leads World in Sovereign Bond Crisis by Ambrose Evans-Pritchard

Posted on February 8, 2010
Filed Under Critical Issues | 1 Comment

The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises – the final error that triggered the implosion of Lehman, AIG, and the Western banking system.

As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression – more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. The surplus regions (China, Japan, Germania, Gulf) have not increased demand enough to compensate for belt-tightening in the deficit bloc (Anglo-sphere, Club Med, East Europe), and fiscal adrenalin is already fading in Europe. The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.

We will be reminded too that the West's fiscal blitz – while vital to halt a self-feeding crash last year – has merely shifted the debt burden onto sovereign shoulders, where it may do more harm in the end if handled with the sort of insouciance now on display in Britain.

Read Full Article Here: Global Bear Rally Will Deflate as Japan Leads World in Sovereign Bond Crisis by Ambrose Evans-Pritchard.

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One Response to “LewRockwell.com: Global Bear Rally Will Deflate as Japan Leads World in Sovereign Bond Crisis by Ambrose Evans-Pritchard”

  1. LewRockwell.com: Global Bear Rally Will Deflate as Japan Leads … | Solar General on February 8th, 2010 12:19 pm

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