Current status of world economic earthquake

Will the shocks following Lehman exceed levels of October 2008?

The world economic situation is changing rapidly. Various indicators seem to indicate that we have reached pre-Lehman levels. Very concerning are indeed the signs from capital markets where a shrinking liquidity has not yet found a way to adjust price levels.

The world has now to dicount further risks, which investors seem to ignore in the hope that after three years of crisis thing will get better. It reminds one those great Alfred Hitchkock movies, where the suspense is build over time and then while the viewer is expecting the worst is allowed to decline slightly. Off course then the "action" starts as surprise which causes the shock effect to the viewer.

Investors now seem to start invest in markets which under normal conditions nobody would  eventually consider as investment opportunity, such as the Australian housing market. Price increases over the last years of over 20% annual, reveal that there is an issue, but the argument is about the same as in other economies. "The story will go on, for quite a while and chances that oneself get wiped out seem to be low"

Looking at the risks we face globally I would state that the following ones are the most important ones to watch:

1. The BP-Oil spill, which seems to turn out to be of catastrophic large implications on the US economy, the price of oil, the food and water supply in the region and last but not least the environment.
2. The health of US finances is deterioating faster than the one of Greece. With Fanny and Freddy becoming an increasing liability and with a governmental budget which seems not to shrink at all.
3. Especially concerning for the US should be the Chinese strategy of decoupling just ahead of the G20. First concerns that the yuan appreciation will trigger a sell-off in US treasuries have been discussed.
4. The increasing number of military forces which are sent to the Persian gulf should make one concerned on potential scenarios, which could become unpleasant to world freedom.

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