Economic analyst Harry Dent's 2009 book, titled "The Great
Depression Ahead" became a national bestseller. He predicted the
current crisis and worse ahead.
His new book, co-authored with Rodney Johnson, predicts "The Great
Crash Ahead." He calls it inevitable and sees protracted trouble
worse than 2008. It's coming between 2012 and 2014 he believes.
In 1992, he correctly forecast the decade's economic/stock market
surge in his book titled, "The Great Boom Ahead." He's now Dr. Doom,
predicting harder than ever hard times. He blames sharply falling
incomes and aging Boomers among other factors.
He may or may not be right. He called the 1990s boom accurately but
wrongly thought Dow values would reach 40,000. Now he sees massive
money creation buying time but little else. Housing crashed. Major
banks are dead. He calls Europe a "retirement community in debt."
He forecasts "economic winter" and advises:
avoid chasing short-term gains;
stress capital preservation;
choose high quality income streams;
pay down debt sooner, not later;
rent, don't buy; and
keep your day job until promising alternatives arrive.
Recent IMF and World Bank forecasts also spell trouble.
On January 18, the World Bank's Global Economic Prospects said world
economies teeter "on the brink of another major decline" with
"anemic growth" at best through 2013.
Predicting "significantly downgraded" prospects from months earlier,
it warned that '"the world economy has entered a dangerous period"
as Eurozone turmoil spreads globally.
"The downturn in Europe and the slow growth in developing countries
could reinforce one another more than is anticipated, (causing)
further complicating efforts to restore market confidence."
Moreover, "the medium-term challenge represented by high debts and
slow trend growth in other high-income countries has not been
resolved and could trigger sudden adverse shocks."
It calls world growth less than 3% recession. Europe's already
experiencing it, and high-income countries are expected to grow only
1.4%, signaling decline. Moreover, given unaddressed excesses,
greater trouble than 2008 is possible "on both sides of the
In other words, despite massive money creation, nothing's been
resolved. In fact, conditions now are worse than when trouble began.
For the moment, they're contained by throwing money at them.
That only works so long. Longer-term, it's a losing strategy doomed
to fail, especially as unemployment rises, wages and benefits fall,
safety net protections erode, public anger grows, and politicians
offer no solutions.
The IMF's nearly as glum. It's predicting 3.3% growth in 2012, down
0.7% from months earlier. It also warned about "intensifying strains
in the euro area" and fragilities elsewhere. They suggest "weaker
underlying growth" ahead.
"(D)ownside risks (have) risen sharply," especially from "the
intensification of adverse feedback loops between sovereign and
banking pressures in the euro area."
The combination of high bond rates, massive debt levels, eroding
consumer purchasing power, and troubled banks pressure governments
to help. Moreover, Europe's trouble assures spillover.
Overall, the IMF sees the "current environment - characterized by
fragile financial systems, high public deficits and debt, and
(short) interest rates close to the zero bound - provides fertile
ground for self-perpetuating pessimism and the propagation of
adverse shock, the most critical of which is the worsening of the
crisis in the euro area."
But trouble there spreads it everywhere. Unless "healing" occurs, a
"1930s moment may arrive....where trust and cooperation break down
and countries turn inward. (A) downward spiral....engulf(ing) the
world" could result.
Meanwhile, China's slowing. Japan's in recession, and Europe's
sickest of all. It's sinking while real Japanese GDP is expected to
contract by 0.4% in the year ending March 2012. Headwinds may force
down the Bank of Japan's 2% 2013 growth forecast because of
protracted economic weakness.
New McKinsey Global Institute (MGI) Report
Titled, "Debt and Deleveraging: Uneven Progress on the Path to
Growth," it suggests systemic unresolved problems.
It calls deleveraging begun in 2008 "proving to be long and
painful." Moreover, it's "in its early stages in most countries." In
fact, debt's risen in the "ten largest mature economies....due
mainly to rising government debt." It exploded but MGI glossed over
a major problem getting worse, not better.
Among the world's 10 largest economies, debt increased by $7.8
trillion. In fact, it's more because informationís suppressed. US
household debt shrunk $584 billion (or 4%) since 2008. Home mortgage
defaults accounted for up to 80% of the total. Jingle mail's been
heavy and promises to increase.
Historical precedence suggests years more deleveraging to go. When
it ends, US consumers "won't be as powerful an engine of global
growth as they were before the crisis." Why? Because excess mortgage
refinancing is gone. It added $2.2 trillion in spending power.
In its mid-January report, the Bank of Canada was just as glum,
Europe's recession is "expected to last longer and be somewhat
deeper than anticipated." B of C blamed tight credit and fiscal
austerity reducing consumer purchasing power.
Modest US growth is expected at best. At issue is "ongoing household
deleveraging, fiscal consolidation, and negative spillover" from
So far, fallout from Europe's crisis "has consisted mostly of a
general retrenchment of risk-taking. (Ahead), the impact is expected
to become more widespread (in) the form of increased funding
pressures, adverse confidence effects and reduced availability of
Europe and US bank deleveraging will reduce credit and restrain
investment. Yearend 2011 baseline trend in real GDP was 1.6%. B of C
sees Europe's crisis erasing half of it. It suggests rosy scenario
forecasts are misguided.
Both McKinsey and B of C explain that today's environment is far
different than any experienced since the 1930s. Other post-WW II
recessions were short and shallow during decades of secular credit
expansion. No longer.
Noted investor/market analyst Jeremy Grantham explains that positive
market conditions unleash "animal spirits." They're carried to
extremes using credit as fuel.
Trouble always follows. Every bubble bursts. On the upside, markets
overshoot and do the same coming down. They mean reverse and then
some. It happens every time. In fact, the more extreme going up, the
greater the fall.
Grantham calls it a "principal truth....(W)e live in a
mean-reverting world in investing. (A)ll bubbles eventually burst."
The most recent occurred in 2000 in America. It's second phase began
in fall 2007 and remains ongoing.
Secular market declines always feature sharp rallies. The overall
trend doesn't end until a final mean-reversed bottom based on
sustained better prospects. Achieving that benchmark's years away.
Economist David Rosenberg agrees, saying the "multi-decade debt
boom....will take years to mean revert." McKinsey said
deleveraging's got a long way to go. Moreover, when governments and
business act together, powerful headwinds risk crashing economies.
The seeds of trouble are planted. No one knows when they'll sprout.
Often it's when least expected. It's why Rosenberg says market
upswings should be rented, not owned.
Progressive Radio News Hour regular Bob Chapman believes the euro is
living on borrowed time. France's April presidential election could
be decisive. If Sarkozy loses (he trails in recent polls), "the euro
is history and perhaps the EU as well."
French and German voters want their currencies back. "They want
change." Their citizens "no longer want the euro and all the
responsibilities (and headaches) that go with it."
At the same time, dollar supremacy is threatened by other countries
trading bilaterally in their own. China, Japan, Russia, Iran,
Brazil, Argentina, Venezuela, and many others do it. At issue is
long-term dollar decline and eventual loss of its world reserve
The implications are immense. With dollar supremacy comes power. It
fuels investment, speculation, corporate takeovers, imperial wars,
and America's ability to influence global policies.
Replace the dollar with another currency and things change. It won't
happen soon but bears watching. Chapman believes its dethroning is
happening. "Over time, the US dollar will lose its preeminent
position." China's yuan and Japan's yen will strengthen. If the euro
fades as Chapman expects, they'll be more important.
"Without a euro, the dollar" faces greater pressure. It's "acted as
a blocker and cover for the dollar," but that's ending.
So is America's century. It's ebbing as China rises, Washington
makes more adversaries than friends, and eventually perhaps they
have none except their axis of evil partners Israel and Britain. It
can't happen a moment too soon.
Stephen Lendman lives in Chicago and can be reached at
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