Friday 21. May 2010 08:53 Age: 107 days
Predictions on the next six months
Deflationary shocks will mark the new future of western economies
Submitting your vote... As souvereigns can no longer bail out the system with borrowing, it is clear that the end of a currency life cycle is closing in.
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The EU most likely prepares for Greece insolvency
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A haircut to greek bonds will be required in this case. Most likely is Greece to leave the Eurozone and the best option then would be to lower Greek interest rates to zero or to denote Greek Euro denoted debt in the new currency.
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A deflationary shock is ahead, most likely starting in the US markets.
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Commodities seem to be the best capital preservation option, but the downside risks are enormous as forced liquidation will most likely kick in in this case.
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Currencies are risky assets as souvereigns all over the world have strechd the debt game to far.
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China is decoupling and does not require exports to sustain growth
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Tradig lessons learned: DO NOT BUY ANYTHING WHICH HAS an AAA rating!
Timing: I usually do not listen to Cramer who stated that the EU will go down the next 48 hours, or never. This is more or less correct. The next targets on the plate of speculators are Spain and the UK. Both getting under attack. Six months is the timeframe which should cover the coming events such as bond auctions and the Greek debt negotiation as well as the commercial real-estate bubble burst in the US.
(keep in mind this is not finacial advise, but rather an observation for discussion)
tags: Predictions, deflation, shocks, stock markets, commodities, banking crisis, financial crisis, souvereign debt, interest rates, greece
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Then we will have to compete with them and with less supply, prices will go through the roof. It will be like trying to buy your own stuff on your bankruptcy auction.
What is your take on this?
I am browsing your articles with a certain interest and amusement I might add.
I am greek and I was born in Greece. Economics are my favorite pastime subject. In my opinion ECB created the crisis in the south by allowing huge credit expansion by increasing the amount of credit available +10 +20 +30% every year while on the same time keeping credit tight in the north. THis allowed the buildup of huge property bubbles (yes we also had a housing bubble here not only in spain) All EU countries have deficits right now above +3% of their budget, In my opinion even 3% is too much if you want to have a sound currency. If you want to have a balanced economy then you keep the money tight.
THis reveals the huge political deficit inside the EU in a world of FIAT currencies having a common currency without a common policy is more or less suicidal and the system is poised to fail. The greek politicians are nothing more than goat herders. I think the whole euro thing is a farce if political
union does not exist in the first place. In greece there is going to be a regime change pretty soon as I see and regime changes are happen in a usual violent manner and a lot of blood shall be spilled quite soon. You cannot have a regime that borrows abuses and spends while at the same time the bill is passed to the people to pay off the bills by huge taxation. It wont work. As peter schiff puts it.. the bailout plan is a plan to bailout the banks the lent to the politicians more money than the greek people could ever actually repay. In the coming November December and so on things are going to take another course here.
Trotzdem möchte ich vielmals für den Mut danken!