G20 calls for higher rates but it is the recipe for the bust of a global debt driven artificial boom – stocks and commodities can collapse
Sam Adelton
Nov. 19, 2006

Right now the global growth is unprecedented. That is because the growth is based on good faith credit that all borrowed money will be repaid one way or the other. This goes on when some one charges the credit card or China lend money to America to dump its goods and services on American consumers. But underlying the massive debt driven bubble lies some hard fact.

The stagflation is rampant in the developed economies. It is also massive in developing economies but the countries like China, India and Brazil do not have the infrastructure and tools to measure real growth accurately. Their heavy inflation is also double counted while measuring the growth. In India for example the economy is growing at the rate of 8.5% but the real wages are growing at 14% per year. But at the same time the inflation is above 14% although Government and the central banks of India (RBI) like all other central banks reports inflation at one third of its real levels.

The underemployment in China and India is actually on the rise. While some make good living working for local agent companies that produce goods and services for western companies, the majority is getting poorer. The disparity between rich and the poor is actually growing. In the developed West things are no better. America and Euro Zone are experiencing for the first time underemployment and real stagflation. But the worst has just started. Because of higher interest rates the stagflation has turned into deflation. House prices will have collapse to adjust to the reality. Car manufacturers just cannot sell at the current levels.

The G20 decision to recommend central banks raise rates is blind folded and misguided. They will soon realize the blunder they made. The Federal Reserve for example just manifested in the meeting minutes that they are extremely happy the way things are going in the economy. The complacency in addition to worst fundamentals is the recipe for real trouble.

It real deflation hits the main street stock can down 70 to 80% easily. So will commodities because there will be no purchasing power.

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