Ali’s blog

Mostly quant stuff with occasional digressions

Yet more on the Depression

Posted by alifinmath on February 23, 2009

Just came across this at dissidentvoice.org:

Let me tell you in no uncertain terms that we are facing a synchronised global economic depression and I am not the only one that is saying this. In early February, the International Monetary Fund’s chief Dominique Strauss-Kahn said the world’s advanced economies — the U.S., Western Europe and Japan — are “already in depression.” Gordon Brown, the UK’s Prime Minister also used the word “depression” to describe the global economy, although his aides quickly said it was a slip of the tongue.

The politicians and others of course avoid using the term “depression” for fear of creating a panic; instead they use terms such as “severe recession” or “one of the most serious financial crises since the great depression,” etc. But they all are saying the same thing, we are in a depression and all the available data support this. An important fact to remember is that this depression is synchronised and this synchronicity has been made possible by the globalization and accompanying deregulation; the very things that were making workers poorer and the rich, richer.

The US economy is in a terrible shape, with all sectors going through severe depression. Housing market has completely collapsed. The auto industry is going bankrupt. The banking sector is alive only by the grace of the government handouts. The entertainment industry (TV and film industry excluded) is facing severe problems and unemployment is increasing rapidly.

According to Howard Davidowitz, chairman of Davidowitz & Associates, as quoted by Aaron Task in Yahoo Finance, American’s standard of living is undergoing a “permanent change” — and not for the better as a result of:

• An $8 trillion negative wealth effect from declining home values.

• A $10 trillion negative wealth effect from weakened capital markets.

• A $14 trillion consumer debt load amid “exploding unemployment,” leading to “exploding bankruptcies.”

“The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.

This is merely an excerpt. Ah well, time to pour myself a stiff drink. Now where did I stash the whiskey?

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