Super-cycle a Davos mirage as the world heads for a bigger crisis
Posted on 24 January 2011 with 1 comment from readers
Who are we to believe is right as the World Economic Forum gathers in Davos this year? Those protagonists of a super-cycle of decades of above average economic growth driven by the Third World, or skeptics who point to a depression in the US, Europe and Japan as about to pull the emerging markets down with them?
You could even try to balance the two and envisage a long period of depressed global business activity followed by a renewal of growth first in the Third World. This is probably a more realistic scenario than the new enlightenment or economic armageddon, although some of the challenges facing global currencies and trade seem closer to the latter.
Double-dip risk
The more optimistic outlook among business leaders assembling in the Swiss ski resort this week is down to the avoidance of a double-dip recession since their last meeting. However, the reality of a can kicked down the road is that it will most likely return, quite suddenly and without much warning.
The first tremors, ironically enough for the super-cycle school, are being felt in the Third World. Equities from India to China have been tumbling in 2011 as the high inflation from irresponsible fiscal policies designed to support artificially and unsustainably high growth rates surfaces to crucify the poorest consumers.
Interest rates are back on a rising trend. This is terribly bad news for the still depressed economies of the developed world where only near zero interest rates have supported high asset values and kept economies from falling into an even deeper slump. But then the debts have gone up and not away.
Currency crises
The world now faces multiple currency crises due to the accumulation of huge debts that demand inflation and devaluation as a cure. But whose currency is going to devalue the fastest in this race? Where is the pain going to be felt most and what does this mean for global trade?
It’s great for Davos delegates to dream of a better future but they should not forget the painful reality of a world three years into a down-cycle. This is no super-cycle.
The value of property is falling. Jobs are vanishing all over the world. The poorest of the world are suffering from crippling food price inflation. Trade has not recovered to pre-crisis levels in most countries.
Growth is an illusion caused by inflation and money printing, nothing more. And as inflation lifts off corporate profits will be its next victim. The next ArabianMoney investment newsletter will mull how investors can still make money in this environment (click here to sign-up).
1 Comment posted by readers:
@Peter:
Your readership should be grateful that you’ve provided them with this commentary, since it exposes the World Economic Forum at Davos for the fraud that it truly is.
The most important truth that the world’s citizens need to know is what you’ve said above; namely, that “Growth is an illusion caused by inflation and money printing, nothing more.” If people around the world understand just this one basic truth, then they are better informed; they will then be able to draw their own logical conclusions that the corrupt banking community is setting the agenda here (i.e. by their attempts to brainwash the masses to go more heavily into debt, and to a greater degree than they are at present).
Their 84 page report is so full of errors (and even outright lies!) that their conclusions make absolutely no sense. Further, it’s incomprehensible that a group of “fairly intelligent, well-educated folk could possibly come up with such nonsense.