Predictions for the economy 2009 and beyond?

**Panda** · 04-01-2009, 07:51 PM

Originally Posted by lom

My prediction:

The 2 most overvalued currencies in the world, the US dollar and the British pound
will drastically lose their appreciation.

After summer, 1 Euro = 1.25 GBP = 1.65 USD

London will lose it's position as the financial centre of Europe.
Frankfurt will become the new centre.

Things dont look too rosy for any of the old established western powers, Europe included. All of them will be having trouble with overvalued currencies impeding exports. But in the free currency market people are still buying up the old tried and proven currencies in the hope of finding somewhere stable to put their money.
Unfortunately this overvaluation of western currencies is simply making the countries concerned more uncompetitive and driving them further towards bankruptcy as imports fail and exports increase.

The developing nations are bound to take the lead eventually as far as currency values and balance of trade goes. Its just a natural process of evolution. A redistribution of world wealth as the most productive countries take the lead.
Unfortunately, the worlds present monetary system is tending to lag behind national trends in productivity and so the whole financial system is out of sync with reality at the moment. All the old western powers think they can borrow their way out of debt, but it just doesn't work that way. Well, not for long anyway.

Bottom line is that eventually, all the old developed nations are going to have to take a cut in currency values and individual standards of living to stay afloat.

**Thormaturge** · 04-01-2009, 07:54 PM

Originally Posted by mellow

In accordance to what I have been reading, all trade agreements are going to be reviewed with the new administration, this will leave Thailand sadly wanting. good2behappy is probably correct about the USA following a protectionist policy, and Thormaturge statement about the unions is also correct. Globalization isn't working, what western country can compete with 200 baht a day wages? The answer and the solution is to close the doors. Increase all tarrifs on imports to match domestic prices, and let the country rejuvenate itself. Countries such as Thailand will have to find other markets or follow the self sufficiency doctrine. I'm sure Europe will be glad to pick up whatever slack there is, created by the terrible US of A. They are much kinder, much more educated, have tons of refined culture, and no money worries.

...and without all those cheap imports inflation will reduce those high earnings to the point where they are worthless. It is only America that can afford American prices which is why GM can't sell cars.

Naturally you can't prevent American companies building their products overseas so all the prducts you plan on exporting will simply be built overseas, thereby racking up US unemployment.

**Butterfly** · 04-01-2009, 08:00 PM

Ok I will try mine: after the USD, UKP, the EURO will take a nose dive

US will recover faster than expected, maybe end of 2009, oil will be back to 20 USD, US markets recovering slowly but surely, other world markets following also but more slowly

China and SEA might see a small echo of 1997 in terms of growth, but without the dramatic effect of the currencies collapse

anyway wishful thinking,

**Rattanaburi** · 05-01-2009, 07:26 AM

Found this article on MSNBC...

U.S. could be facing debt 'time bomb' this year
Investors' thirst for American securities could finally be quenched
U.S. could be facing debt 'time bomb' - Washington Post- msnbc.com

BKKAndrew, the other thread is 50+ pages; I'll read it later. What's your basic prediction for the future as a short summary. How many years do you see it recovering in if at all?

**Thormaturge** · 05-01-2009, 07:36 AM

Interest rates on Treasury bills have plummeted to historic lows,

With the prospect of the Dollar sliding further downwards my bet is on foreign investors buying gold instead of T Bills.

**Farangbaba** · 05-01-2009, 08:12 AM

This was published the other day in the Daily Mail by Peter Oborne.
It makes a lot of sense to me, but I am sorry that I do not know how to format it properly yet.
http://www.dailymail.co.uk/debate/article-1104018/PETER-OBORNE-The-pound-trouble-dont-fooled-euro-gloaters-Their-bogus-currency-20th-birthday.html

The pound may be in trouble but don't be fooled by the euro gloaters. Their bogus currency will never see its 20th birthday

This week marks the tenth anniversary of the euro - and every eurocrat in existence is hailing the single currency as an exquisite success.

According to European Commission president Jose Manuel Barroso, the euro has helped create 16 million jobs. The French finance minister Christine Lagarde hails it as 'a zone of security and stability'.

Joaquin Almunia, the European Commissioner for Economic and Monetary Affairs, declares that: 'The euro has become the symbol of EU identity and is protecting us against the tremendous external shocks that we have had to cope with since the summer of 2007'.

Scroll down for more

Attack: The euro is being tested for the first time - and it won't survive the mauling
Meanwhile, there are many within the British political and business elite - among them Business Secretary Peter Mandelson and former Prime Minister Tony Blair - who secretly wish Britain was in the euro, and believe we made a terrible mistake when we refused to join in 1999.

To be fair, the europhiles do appear to have reason to celebrate.

Consider these statistics. Following yesterday's accession of the Eastern European state of Slovakia, there are now 16 members of the single currency, compared to a mere 11 in 1999. This means an amazing 330 million people now use the euro as their national currency - more than the population of the U.S.

No wonder, say the eurofanatics, that it has strengthened over the past few years and now stands at parity with the pound sterling - stronger than it has ever been.

Not merely that, there are also those who now believe that the euro will soon overtake the dollar as the world's reserve currency. Indeed, even the villain in the latest James Bond film, Quantum Of Solace, chooses to pay his debts in euros because, so he says: 'The dollar isn't what it was.'

But the truth is very different. As even its strongest supporters must admit, the new
currency was mollycoddled during a decade of benign global economic conditions - and only now is being tested for the first time. And it is already showing signs of being unable to survive the strain.

Indeed, far from being the staggering success its supporters claim, the euro-zone is already inflicting huge damage on the nations within it. Many currency market experts believe that some of these struggling members may be forced to peel away from the euro - with devastating consequences for the rest of the world.

The greatest problems, in the short term at least, are in the four Mediterranean economies known as the PIGS - Portugal, Italy, Greece and Spain.

For each of these countries, the euro has already proved a disaster. Put simply, most of the PIGS are so heavily indebted that the market no longer believes they will be able to repay their borrowings.

Normally, if a country falls into too much debt, it can devalue its currency, essentially devaluing its debt burden - this is exactly what Britain has done over the past few months. In the euro-zone, however, the currency's value is set centrally.

This means the only way out for the struggling PIGS is to crash out of the euro, default on their debt and start again. At the start of 2009, this prospect is beginning to cast a huge shadow over the global economy, for the sums involved are huge.

Take the terrifying case of Greece, which was an economic basket case even before it entered the euro, and is even more of a shambles today.

Greek unemployment is soaring, and its current account deficit is a whopping ten per cent of gross domestic product (Britain's deficit is bad enough at three per cent).

But the largest problem is Greek government debt, which stands at a monstrous 94 per cent of gross domestic product - and rising fast.

Already investors have reached the obvious conclusion that there is a very high chance that the poor old Greeks will never be able to repay their debts. That is why the markets now demand to be paid an extra two per cent in return for lending to Greece compared to Germany, even though both countries denominate their debt in euros.

The brutal truth is that if the markets really believed the euro was going to survive, Greek and German debt would cost the same.

But soaring debt is not the worst of Greece's problems. The economy has tilted into recession, and unemployment has risen. Greece desperately needs interest rates to fall - but the European Central Bank is refusing to cut them. The effects are being felt on the streets, and the past few months have seen the worst riots in Athens since the country was a military dictatorship in the Seventies.

There have not yet been riots in the other PIGS - but Portugal-Italy and Spain are all heading for trouble. Spain, thanks almost entirely to the misguided policies of the European Central Bank, is now an economic disaster zone.

In the early years of the euro, the ECB kept interest rates far too low - fostering an inflationary property boom which has ended in inevitable collapse.

Now rates are much too high for Spain's broken economy. The Spanish jobless figure, thanks to the country's membership of the euro, is already 13 per cent. It is expected to approach a truly unbelievable 20 per cent by2010.

Things are already bad enough in Britain, where the jobless rate stands at six per cent.

At least Spain's public debt is relatively manageable, but that is not true of the remaining PIGS - Italy's government borrowing is actually larger than its gross national product.

The truth is that all the PIGS are paying a terrible price for their membership of the euro. If they had kept their own currencies, they would be able to use the traditional tools of economic management. They would set their own interest rates and they could inflate or deflate their national currencies as circumstances demanded.

As it is, however, governments in the euro-zone are utterly powerless to do anything about the menace of joblessness and economic collapse. And to appreciate how damaging that is, one only has to contemplate the fate Britain would now be facing if had we made the mistake of joining a decade ago.

For starters: Greece is just the first of the four major Mediterranean economies to turn into an economic basket case
In the early years, we would have suffered the problems of the poor, hapless PIGS.

The interest rates set by the European Central Bank would have been far too low - meaning the credit boom of the past decade would have been even more inflationary and damaging than was actually the case.

And the recession would have bitten far deeper. Interest rates have stayed far higher on continental Europe, driving millions who would otherwise have a job out of work.

And our currency would have been tied to the strong euro, rather than being allowed to depreciate, find its own level, and give vitally needed assistance to exporters.

Bad though the recession already is, it would have been far worse for Britain had we - as Tony Blair so desperately wanted - joined the euro.

That is why, as the euro celebrates its tenth anniversary, I predict two things.

First, it will never reach its 20th anniversary. The drachma, the lira, the peseta and the Portuguese escudo (and the Irish punt - Ireland can be regarded as an honorary PIG) will all make a return as the PIGS plunge for the exit.

Second, the collapse of the euro-zone will not be a peaceful process. Expect the European political elites to fight to save their beloved single currency.
Eventually, however, their citizens will take to the streets and force their hands. In Britain we can thank our lucky stars we do not have to go through the same painful and bloody crisis.

Gordon Brown had a mixed record as Chancellor of the Exchequer, and bears a heavy share of the responsibility for the recession. But he did one thing for which we should all be thoroughly grateful - he kept us out of the European single currency.

**Butterfly** · 05-01-2009, 09:15 AM

Originally Posted by Thormaturge

With the prospect of the Dollar sliding further downwards my bet is on foreign investors buying gold instead of T Bills.

with what cash ? there is not any left. Gold will be on the path to deflation like everything else. Gold doesn't do well when there is no inflation.

**Muadib** · 05-01-2009, 09:18 AM

Originally Posted by Panda

There is plenty of oil to go round for probably the next 300 years.
Its just the high quality, cheap to extract stuff is getting low.

It ain't oil thats causing this adjustment in world wealth.

Care to elaborate where these oil supplies are that are readily available for the next 300 years???

Energy costs are a commodity item there is ever more present on balance sheets, which in turn drive P&L's...

**Butterfly** · 05-01-2009, 09:20 AM

Originally Posted by Muadib

Energy costs are a commodity item there is ever more present on balance sheets, which in turn drive P&L's...

would you care to elaborate on that statement ? it sounds very bkka-like

**Thormaturge** · 05-01-2009, 09:45 AM

Originally Posted by Butterfly

Originally Posted by Thormaturge

With the prospect of the Dollar sliding further downwards my bet is on foreign investors buying gold instead of T Bills.

with what cash ? there is not any left. Gold will be on the path to deflation like everything else. Gold doesn't do well when there is no inflation.

Haven't you heard? Santa Claus is coming to town. Lots of lovely cheap credit is being offered by governments worldwide.

The Western economies, particularly the USA, are stoking up inflation nicely. The Fed is positively chucking kerosine onto the fire. We are in for another round of spiralling house prices fuelled by cheap credit, with the price of everything else following suit. Ether incomes will fail to keep up or there will be staggering unemployment.

**Butterfly** · 05-01-2009, 09:55 AM

Originally Posted by Thormaturge

Santa Claus is coming to town. Lots of lovely cheap credit is being offered by governments worldwide.

yes, but this will help get us out of a recessionary gap, not fuel inflation

Originally Posted by Thormaturge

The Western economies, particularly the USA, are stoking up inflation nicely. The Fed is positively chucking kerosine onto the fire.

You will need to get yourself familiar with macro-economics. We are in a deep recession, thanks to a supply shock and a credit bubble. The fire is long gone, what we have now is an ice age. You need the fire to melt the ice.

**Panda** · 05-01-2009, 10:22 AM

Originally Posted by bkkandrew

Originally Posted by Panda

Originally Posted by Thormaturge

^
Yes, America winds up with the rubber dog toys and China gets the money.

Just hope rubber dog toys hold their value.

The joke will be on the Chinese when the value of the $US crashes.
Sort of like borrowing $100 worth of goods and only having to pay back $50s worth down the line. The trap hasnt sprung just yet and just about every country other than USA stands to loose when it does. Such is the worlds resistance to move on to a new monetary system that could rectify the current imbalances between $US paper money and actual goods and services. It has to come sooner or later though.

Its not just the Chinese - its all of Asia. I have just posted an excellent (but scary) article on the subject here:

https://teakdoor.com/us-domestic-issu...tml#post903050

And not just Asia. Just about every country in the world has substantial reserves of $USs. A large drop in the exchange value of $USs would affect the perceived wealth of virtually every country on the planet. Hence the world leaders desire to keep the debt ridden $US alive as the primary exchange medium for world trade.

With the US in such debt, lack of trade balance and now starting to print an oversupply of paper money, its only going to take a small amount of panic selling to start a stampede to abandon the $US. And thats the very thing every country is trying to avoid. But its got to happen sooner of later. And when it does USA will be paying off its debt at 50 cents in the dollar relative to the value in tradable goods and services compared to when they borrowed the money. Good for a US recovery, -- bad for everyone else.

Its not a housing bubble, its not a stock market bubble its a $US bubble thats going to cause a major readjustment in world wealth.

"http://en.wikipedia.org/wiki/Foreign_exchange_reserves
url(http://upload.wikimedia.org/centraln...tton-red.png);
"At the end of 2007, 63.90% of the identified official foreign exchange reserves in the world were held in United States dollars and 26.5% in euros [1].
Monetary Authorities with the largest foreign reserves in 2008."
RankCountry/Monetary Authoritybillion USD (end of month)change in year 20071

China$ 1905 (Sept) 1+32.9%2

Japan$ 997 (August)+8.7%3

Russia$ 484.7 (November 2008) 2 [1]+56.8%-

Eurozone$ 430 (November)+16.6%4

Taiwan$ 282 (August) [2]+2.7%5

India$ 247 (Nov) 2+64.4%6

Brazil$ 208 (Dec) 3+105.9%7

South Korea$ 201 (Nov)+9.7%8

Singapore$ 175 (July)+19.1%9

Hong Kong$ 158 (August)+14.6%10

Germany$ 137 (August)+20.3%

**Panda** · 05-01-2009, 10:41 AM

Originally Posted by mellow

In accordance to what I have been reading, all trade agreements are going to be reviewed with the new administration, this will leave Thailand sadly wanting. good2behappy is probably correct about the USA following a protectionist policy, and Thormaturge statement about the unions is also correct. Globalization isn't working, what western country can compete with 200 baht a day wages? The answer and the solution is to close the doors. Increase all tarrifs on imports to match domestic prices, and let the country rejuvenate itself. Countries such as Thailand will have to find other markets or follow the self sufficiency doctrine. I'm sure Europe will be glad to pick up whatever slack there is, created by the terrible US of A. They are much kinder, much more educated, have tons of refined culture, and no money worries.

The US wont need protectionist policies or import tariffs when the US debt-dollar falls in tradable value. Domestic products will become far more attractive compared to the more expensive imported stuff. Exports will become more competitive too. A phoenix rising from the ashes. Every other country will pay for it though.

**Thormaturge** · 05-01-2009, 10:44 AM

Originally Posted by Butterfly

Originally Posted by Thormaturge

Santa Claus is coming to town. Lots of lovely cheap credit is being offered by governments worldwide.

yes, but this will help get us out of a recessionary gap, not fuel inflation

Originally Posted by Butterfly

The fire is long gone, what we have now is an ice age. You need the fire to melt the ice.

The spark is already there, it is called free enterprise. A combination of free enteprise and cheap money is what got us into this mess and we're simply going for more of the same to get out of it, except this time there will be more credit, and cheaper.

Hair of the dog therapy.

bkkandrew · 05-01-2009, 11:14 AM

Originally Posted by Rattanaburi

Found this article on MSNBC...

U.S. could be facing debt 'time bomb' this year
Investors' thirst for American securities could finally be quenched
U.S. could be facing debt 'time bomb' - Washington Post- msnbc.com

BKKAndrew, the other thread is 50+ pages; I'll read it later. What's your basic prediction for the future as a short summary. How many years do you see it recovering in if at all?

It is much more complex that that, which is why I invited you to look at the detail on the other thread.

However, both the US and UK face financial and economic decimation, currency collapse and Governmental default (by way of the printing press or insolvency). Needless to say, that will take many years to recover from.

**britmaveric** · 05-01-2009, 11:17 AM

^Also EU, and most every other country in the world.

bkkandrew · 05-01-2009, 11:41 AM

^Well, they would hardly be unaffected, would they...

**Butterfly** · 05-01-2009, 11:55 AM

Originally Posted by Thormaturge

The spark is already there, it is called free enterprise.

it's actually called growth, do we want it or not ? the alternative is living like in the middle age. Not a bad thing per se, but I doubt the majority of the world population would agree with that plan.

**Whiteshiva** · 05-01-2009, 12:06 PM

Just thought I shoudl point out that TD posters have a pretty piss-poor record when it comes to economic forecasts.....

https://teakdoor.com/issues/31295-pol...tml#post903921

**Butterfly** · 05-01-2009, 12:13 PM

^ it's random, actually. Sometimes you are lucky, sometimes you are not

That's why I am laughing every time someone is betting their predictions on some idiotic blog guy diatribe who may have got it right a couple of times. It's more than likely he will be wrong the next time.

bkkandrew · 05-01-2009, 12:16 PM

Originally Posted by Whiteshiva

Just thought I shoudl point out that TD posters have a pretty piss-poor record when it comes to economic forecasts.....

https://teakdoor.com/issues/31295-pol...tml#post903921

After the dollar collapse, which I was factoring in pre-end 2008, the price (in dollar terms) will be somewhat different...

**britmaveric** · 05-01-2009, 12:17 PM

^you will be waiting for sometime mate especially when the $ doesn't collapse.

bkkandrew · 05-01-2009, 12:22 PM

Originally Posted by britmaveric

^you will be waiting for sometime mate especially when the $ doesn't collapse.

Why won't the dollar collapse?

**britmaveric** · 05-01-2009, 12:24 PM

For starters you are predicting it.

**Panda** · 05-01-2009, 07:38 PM

Originally Posted by bkkandrew

Originally Posted by britmaveric

^you will be waiting for sometime mate especially when the $ doesn't collapse.

Why won't the dollar collapse?

The main reason why people think the $US is unassailable and permanent in its strength is that they have never known anything different in their lifetimes.

But the experiment with the $US as the worlds denominator of wealth is but a recent invention in historic terms. The dynamics of the worlds financial systems have changed considerably over the past few decades.

The world is evolving and developing. Things change ever more quickly as time progresses. This experiment in trying one nations currency as the worlds default trading medium has run its course and proven to be ineffective now. Time to move on and put something more durable in place.

Something more flexible is needed. A world trading currency that is based on actual productivity of real goods and services rather than just faith and debt.

The point that most people miss is that paper money doesn't drive the worlds economies at all. Its productivity that is the real driver.

Right now, a lot of people think that value of the worlds productivity is worth less, but it hasnt changed at all. Its just that the paper money trading medium $US is vastly overvalued.

A lot of investors are pulling their money out of companies that actually produce useful stuff right now and investing it in $US paper money. That's going to cause a lull in world production for sure and also a rise in the value of the worlds trading currency. That's where we are at the moment. Investment going away from production and towards propping up the illusion of of paper money wealth.

Pretty silly, but thats the way the worlds financial system operates at the moment based on an unsustainable monetary system.

The worlds experiment with the $US hegemony is coming to a close.

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