[LINK] Future US/World Economics

[Frank O'Connor]

Mmmm …

Just a couple of comments.

1. The Depression actually got going about 3 or 4 years after the 1929 Crash. We seem to be tracking that cycle quite well.

2. In Australia we STILL HAVE a Housing Bubble extroadinaire. Sure the price rises have halted, but prices are still at economically unsustainable levels (7 to 8 times annual income in many areas - when 3 to 4 is the norm). The BIg difference between Oz and the US is that Australian mortgages are actually documents in which you sell your soul and the souls of your children and generations to come … so they're not as easy to walk away from as US mortgages.

3. Economic pundits tend to sound rational and promote well reasoned arguments, but in the final analysis economics is not rational. It's simply a quantitative method for attempting to understand the irrational (human behaviour) with all the flaws that entails. The flaws of course are that it works fine when everything is burbling along and people are calm and collected, but fails abysmally when people go nuts (either with exuberance or fear). If the last hundred years have proved anything, it's that economists are singularly pointless and useless when it all goes to pot. (Market economists by contrast are pointless and useless all of the time - given that they prognosticate only in the interests of those who employ them (banks, big corporates etc).)

4. To that extent, the predictive reliability of the Shockwave book is liable to fail. Yes, things will stumble along basically to the plot for a year or two, but when push gets to shove and panic sets in - things are way less predictable. I wouldn't like to predict what will be the situation a year from now.

5. His 'investment strategies' if you like to put it that way basically come down to 'sell your house and rent, clear your debts and get into gold and ride out the 'Gold Bubble'' … which in my mind is another Bubble you want to avoid. In times of bubbles, the point is not to go with the herd into new bubbles. (and what the heck, most people can't afford a lot of gold at $2000 per ounce)

6. Whether we in Australia go inflationary or deflationary is debatable. The US will probably go inflationary (as the author suggests) due to the 'qualitative easing' the Fed is getting into, but Australia could/will probably go deflationary (i.e we'll probably have a conventional recession/depression)… and in a deflationary environment cash is King.

7. Despite what Treasury says, I'd say the Mining Boom has, at most, only a couple of years to go. The bottom line is that China is pretty well 'infrastructured out' for its current requirements, if the US goes to poo (and I believe it will) overseas demand for Chinese product tanks (there goes the export market), $1.5 trillion in US bonds gets written down, and its own people are feeling the pinch with inflation running at 8-9%, suffering their own Housing Bubble extroadinaire, and prices for staples like food and power going through the roof. The demand for iron, nickel and other Australian ore will drop through the floor when the construction industry collapses … and then our schizoid economy will revert to one depressed one.

Just my 2 cents worth …

									Regards,
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On 27/08/2011, at 9:42 PM, stephen at melbpc.org.au wrote:

> Anyone care to comment on this item regarding future US/world economics? 
> 
> Basically, a new book (author interviewed below) predicts major problems 
> looming. For example, 100% $US inflation over three years, and a 90% US 
> stockmarket collapse. The writer also gives advice for individuals. 
> 
> My question is, if this eventuates in the US, how exactly might it effect 
> Australia? And, is his general advice relevant for Australians? The 
> writer does seem well connected and respected, and just maybe his 
> predictions are correct.
> 
> (Also for interest, today the New York Times opinions, "Political 
> intimidation has forced the Fed into inaction and is killing our last 
> remaining hope for economic recovery." (And) "Bernanke Blames Politics 
> for Financial Upheaval: In his much-anticipated speech, the Federal 
> Reserve chairman said that the United States fiscal system was broken.")
>