No, there will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009downturn seem like a walk in the park.
Some of these reports are simply selling fear, while others are extrapolating the past as a road map to the future. The anticipation of another sharp drop based on the assumption that 2000-2016 is nothing more than a repeat of 1929-1945 fails to understand that these two periods, while showing cyclical similarities, are not comparable. While the world was defaulting in 1931, the US and its dollar as a net creditor nation benefited from safe haven capital flows. This is why Roosevelt could'd devalue until the gold was confiscated. Gold backed the dollar and money sought the safety of gold.
The US, a net debtor rather than creditor nation, like the rest of the world 1931 is defaulting on its debt through currency debasement. In my commentary, Where does confidence lie?, I suggested that confidence is transitioning from the public to private sector as the citizens of the world relearn the lesson of history that governments never repay their debts. It is the realization that has created capital flows to tangible assets (which includes fractional ownership in corporations). This is why the stock market soared during extreme currency devaluation of the Weimar Republic.
Source: economicpolicyjournal.com
0 comments:
Post a Comment