GDP growth of 1.6% confirms stagflation as economy heads for a deflation plagued depression
Sam Adelton
Oct. 28, 2006

The housing, auto and retail will sectors will lead the depression in the world. The stagflation was conformed to 1.6% - the slowest growth in US economy since 2003. With all that liquidity in the system the performance of the economy shows how underemployed the resources are.

After a slight up tick in early 2007, the economy will start its multi-decade journey downwards. It will be deflation that will dominate. The world will finally recognize the exported wage deflation of India and China. The economy will also fall apart because of excessive borrowing, little savings and extremely poor trade balance.

The service and manufacturing jobs will start coming back to United States. America will take control over its border; immigration issues and above all will enforce free and fair trade. China and many other countries will start the trade war. The trade war which has already started at the World Trade Organization will escalate like never before.

The stock market will collapse. Long term rates that are supported by Asian central banks will sky rocket to above 15% although Fed will reduce the rates to zero percent as was in Japan for many decades.

The deflation will be triggered by the inability of the economy to purchase goods and services. Every long term depression starts with underemployment and stagflation.

People are employed with lower wages as China and India continue to export their wage deflation to US and Western Europe. Those in the board rooms of the Western corporations have enjoyed a lot from cheap labor in India and China. It will be give back time because they will not able to sell any more in US and Western Europe. The lack of purchasing power will dominate the economic scenarios.

House prices will continue to plummet and continue to go down for decades as the bubble unwinds and people face foreclosures and bankruptcies.

As America is forced to close its border to illegal immigrants and unfair goods and services from China and other countries, trade balance will dramatically improve. However, the fiscal systems will be in doldrums.

The world economies especially in America, India and China were in ‘high’ for a long time. As these economies get depressed the world will face a massive economic downturn never seen in the last 2000 years.

GDP growth of 1.6% confirms stagflation as economy heads for a deflation plagued depression
Sam Adelton
The deflation will be triggered by the inability of the economy to purchase goods and services. Every long term depression starts with underemployment and stagflation...
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