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The world is plunging into a stagflation driven depression – but do not expect much downturn immediately
The problem started in 1980s. It may accelerate a little but it will take twenty to sixty years to unfold – may be even more. Some financial think tanks are making their clients ready for an immediate inflation driven recession. While the fundamentals for the downturn is clear and transparent, the Governments of the world can continue to print money, ease monetary policy, provide loans to people without regard to pay back capabilities. The net effect is that the world will experience financial and economic trouble but very slowly.
Gold rallied against all currencies – not just dollar. The increasing US budget deficit calls for stagflation. The consumer confidence in the US economy plunged. The inflation pressures as predicted by energy, commodities and metals spiked upwards. The jobless claims soared to the highest in many months.
Stagflation is back. It is a phenomenon where inflation is rapid but the corresponding growth in the economy is missing. It make all poor. The poor struggles to keep up to the increasing cost. The middle class drifts towards poverty and the rich starts hiding behind precious metals instead of following supply side economics.
As US economy faced dreadful stagflation, the world economy will also plunge into similar problems. India and China is about to plunge into a deep depression in spite of their go-go economy as manifested by mews reports now.
The energy price escalation will hurt India and China the most as these socialist and communist countries try to subsidize energy prices to its citizens.
What was real alarming is the total collapse of US consumer confidence while price deflator showed enormous amount of inflation. Hurricane Katrina delivered a serious blow to US consumer confidence, sending it to its lowest level for a decade in September, according to figures released on Friday.
The University of Michigan’s widely-watched initial sentiment index for September slumped from 76.9 from 89.1 last month - more than economists had expected. The worst deterioration came in the longer-term measures, with the index for the one-year outlook dropping 37 points. Expectations about the future fell even more, with the index measuring the outlook for the year ahead down at its lowest level for almost 13 years.
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