Thursday, January 15, 2009

Societe Generale Analyst: "A Depression Is Coming"...WTF Do We Do NOW?

The Societe Generale analyst who called the market rebound in October now says to prepare for a depression in America and the possibility that China could "implode":
In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.

He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels.

Edwards also raised the danger of a global trade war with China.

"While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere," Edwards wrote.

"It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."

Sam Jones, blogging at FT Alphaville, calls Edwards' accompanying charts "frightening":

The OECD’s leading indicators are pointing to a total and swift collapse in Chinese GDP growth. Edwards produces two more graphs, using another indicator not included in the OECD’s calculations - electric power output.

And the relationship between electric power output and GDP:
If the Chinese economy collapses, or even slows dramatically, then the raison d’etre for the country’s huge FX reserves - as a sterilisation measure to dampen domestic inflation - will evaporate. With that, so will China’s US Treasury holdings. Or alternatively the Chinese could devalue the yuan.

Either way, the US will be in trouble. Treasury prices could collapse (although given the current renewed banking collapse fears, not before a significant rally has occured) and if that happens, the Fed’s yield-lowering credit easing policies will be left in tatters. As will any plans for economic stimulus packages. Hypothetically that would leave just the nuclear option: devaluing the dollar.

I read articles like these and worry. President-Elect Obama has enough problems with wingnut Republicans, Middle East upheaval, and environmental disasters already, on top of two wars and cleaning up Washington after the Bush crime family leaves town, to be facing a world-wide financial depression and the collapse of the Chinese government.

But I don't see a flaw in Edwards' figures. All the Wal-Marts in the world can't change those graph lines and trends. And Americans themselves are already in a helluva jam.

U.S. foreclosure filings jumped 81 percent last year as falling house prices, tighter mortgage lending and the longest recession in a quarter century battered property owners, RealtyTrac Inc. said.

[...]The nation lost more than 2.6 million jobs last year, the most since 1945, and U.S. stocks had their worst performance since the Great Depression.

[...]The foreclosure crisis will probably deepen this year as lenders put thousands of bank-owned properties on the market, said real estate broker Mike Novak-Smith in Moreno Valley, California, near Riverside. He said he expects one U.S. lender that he declined to identify to put 3,000 foreclosed homes on the market next month in Southern California.

“I think it will get substantially worse,” Novak-Smith, of the RE/MAX Results brokerage, said in an interview. “You’ve got people losing jobs right and left and the general business climate is bad. We’ve got an economy built on easy credit, and now it’s got to revert.”

So we're deep in debt, homeless, out of work, and we may not be able to charge any more cheap plastic crap at Wal-Mart?? Whatever will all the suburban shoppers do?--oh, right: they're living in cardboard boxes now, anyway, because the repo man took their cars. This isn't a problem for Obama, this is a job for Superman!

Oh, BTW: remember, it's OBAMA'S Recession now:
Got it? Obama OWNS the economy the day he becomes President. His fault. That growth during the Clinton years- that was due to Reagan. The bad stuff from 2000 on, that was the Clinton economy, until, of course, the 20th, when it becomes Obama’s.
So it'a all on Obama's head, come Tuesday. I pray for him. And whatever diety you worship, pray for him too...and for us all.

1 comment:

MC Shalom said...

Chairman Ben S. Bernanke, We Are on Our Way to Abolish Credit.

All of Our Economic Problems Find They Root in the Existence of Credit.

Out of the $5,000,000,000,000 given out to the banks, that is $1,000 for every inhabitant of this planet, what is it exactly that WE got?

A Credit Free, Free Market Economy Is Possible.

Both Dynamic on the Short Run & Stable on the Long Run.

I Propose, Hence, to Lead for You an Exit Out of Credit:

Let me outline for you my proposed strategy:

Preserve Your Belongings.

The Property Title: Cast Your Vote to Abolish Credit.

The Credit Free Money: The Dinar Shekel AKA The DaSh, Symbol: - .

Asset Transfer: The Right Grant Operation.

A Specific Application of Employment Interest and Money.
[A Tract Intended For my Fellows Economists].

If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless?

Since credit based currencies are managed by setting interest rates, on which all control has been lost, are they managed anymore?

We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.

In This Age of Turbulence The People Want an Exit Out of Credit: An Adventure in a New World Economic Order.

The other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.

It will be either awfully deadly or dramatically long.

A price none of us can afford to pay.

“The current crisis can be overcome only by developing a sense of common purpose.
The alternative to a new international order is chaos.”

- Henry A. Kissinger

Let me provide you with a link to my press release for my open letter to you:

Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can't Work!

I am, Mr Chairman, Yours Sincerely,

Shalom P. Hamou AKA 'MC Shalom'
Chief Economist - Master Conductor
1 7 7 6 - Annuit Cœptis
Tel: +972 54 441-7640