Why doesn’t the stock market reflect the imminent Global Depression?
June 20 2012 at 9:02 AM No score for this post
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Europes train-wreck and the inevitable collapse of the global economy
Why doesnt the stock market reflect the imminent Global Depression?
posted on June 20, 2012 by The Extinction Protocol
June 20, 2012 ECONOMY We seem to be heading towards an economic downturn equivalent to the Great Depression of the 1930s. This isnt a secret. The synthesis below is derived from: Lawrence Summers, Nouriel Roubini, Simon Johnson, Niall Ferguson, and Paul Krugman to name just a few. This crisis is not happening quickly. Its more of a slow-motion train wreckGreeces crisis started in 2009. But that leaves a puzzlewhy is the American stock market not reacting to obvious warning signs? Greece and Spain already have unemployment rates exceeding 20 percent. If that isnt a depression, what is? Greece is in very deep trouble. Spain (the Euros fourth largest economy) just needed a $125 billion bank bailout. The weaker economies (Portugal, Ireland, Italy, Greece, Spain) face severe credit crunches as local banks lose deposits (withdrawn because of credit concerns and fear of forced devaluations following a Euro exit). Serious discussion is already taking place about the demise of the Euro, or even worse the break-up of the European common marketin which case unemployment rates across Europe will exceed 20 percent. National incomes will decline sharply, resulting in large-scale corporate insolvencies, with the crisis spilling over into the U.S. and Asia. The U.S. faces a recession next year if the Budget Control Act takes effect, which is likely if Obama wins and partisan gridlock continues. House Speaker Boehner already announced that if Obamas re-elected, the GOP will treat us to another debt ceiling confrontation. If Romney wins, the Democrats (having learnt their lesson from the Republicans) would be as disruptive as possible. If the U.S. faces a major economic crisis triggered by the Euros collapse, bipartisan consensus on how to resolve it is unlikely. Chinas growth model may be reaching its limit. If the rest of the worlds problem is too much ideology, Chinas is arguably the absence of any ideology except kleptocracy. China lacks a functioning legal system. Its officials are disciplined by shadowy communist party entities, rather than accountable to a transparent legal system. Nominally ruling in the name of the proletarian vanguard, China is governed by princelings and kleptocrats, with friction escalating among the kleptocrats. Internationally, another regional war appears increasingly likely in the Middle East. The U.S. and/or Israel might have a military confrontation with Iran, over Irans nuclear ambitions. The Syrian situation has the potential to become a regional conflict (Syria, Iran and Russia fighting Syrian dissidents supported by some coalition of Saudi Arabia, the U.S., Turkey and other countries). A Middle Eastern war would lead to significant oil price increases, and trigger a global recession (at a minimum). Compared to the financial crisis of 2008, governments everywhere are far more constrained by weaker balance sheets, loss of public trust and crisis fatigue. Business Insider
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