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World economies stand in front of the largest ever depression triggered by hyper-stagflation – stock markets ready to slide over the cliff
The go-go economies of the world have produced bull markets never seen before. Even the US economy keeps going up based on borrowing and dilution of loan underwriting principles. Indian and Chinese economies are going north relentless by the incoming Foreign Direct Investments as companies in the West have given all hopes up of producing goods and services in their own countries.
The basic materials and commodities have gone up in prices by more than 60% in the last eighteen months. Crude Oil price has more than doubled in the last twelve months. India and China has subsidized the oil prices to their own citizens through the use of state run oil companies. Indians and Chinese population (more than 60% of world population) never really curtailed crude oil use because they never faced higher oil prices. Car companies are selling more cars in China and India than the rest of the world. India and China are also experiencing ballooning debt – the concept borrowed from the West.
Finally real estate – oh boy! That is another saga – the hot balloon of the millennium. Common people all over the world especially in the United States have bought all real estate they could buy on debt. The prices have gone up vertically - doubled, trippled, quadrupled .....
The stock markets have rallied as part of a cycle within the secular bear markets.
Oil prices finally confirmed they are ready go up much more – may be triple of what it is now in the next two years. The metals and basic commodities may go even higher.
The US and other international stocks are showing failure in technical bull signals. Simply put, stock after stock, is provoding solid technical signals that they will accelerate to the north but have failed miserably. This happens when we are in front of major declines in the markets and the economies. Last time that happened was in 1987 before the stock market crash.
This time it will happen slowly but for many years accelerating downeards as time goes by. It is the third leg of the secular bear market - the viscious one. It will wipe out capitals all over the world. We are going into a period when the pay back time has come. Indian and Chinese economies will suffer the worst in coming years. The go-go economies will have to dress up again.
Stagflation – hyper-stagflation will trigger the depression. Debt burdened consumers will not be able to buy any more because their credit limits are hit. The conumers have paid the escalted oil prices through their credit cards. In the mean time raw materials prices are going to double or triple. Companies will lose all pricing power triggered by consumer driven stagnation. But the commodity inflation will dominate the scenarios. Finally, in 2006-2007 the great depression will start which will cause the financial meltdown of the world financial systems and economies.
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