PrudentBear.com – The One-Stop Shop for the Bear Case

Ξ October 24th, 2005 | → 0 Comments | ∇ Science |


      A debt-deflation induced depression would have a dominating influence on the US economy over the next ten years. A crucial factor in the future performance of the US economy is the housing market. A crash in the over-inflated housing market has the potential to drive the US economy into a depression. A depression in the world's largest economy has the potential to plunge the world into a similar situation, especially in light of the struggling Japanese and German economies. In this, the worst-case scenario for the US, ten years might not be enough for the economy to see a recovery.

      The scenario above is likely, but it is not the only possibility. The Federal Reserve is well aware of the potential dangers. Although avoiding disaster may be beyond the Federal Reserve's capabilities and economic realities, avoiding a depression would prove the resilience of the US economy to economic shocks.
      Speculative bubbles and the consequent crashes are an economic reality, perhaps the awareness of Fisher's model has helped economic policy makers and intelligent businessmen to create an economy and companies which are not immune to the effects of economic shocks, but are more resilient to them."

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      This would kinda tie in with kondratieff's long wave as well, sometimes the more you prop something up the worse it gets. eeek!


       

 

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