Wednesday, October 20, 2010

Société Générale's Albert Edwards: Cry Havoc and Let Slip the...Ah Screw it (Oct. 20, 2010)

Albert seems troubled. Not in his usual "This Week’s Advice: Canned Food, Guns and a Ham Radio" way but in a more subdued, almost resigned style. Which is why I went with our headline. Here's FT Alphaville's:
The end game approaches
Regular FT Alphaville readers will be familiar with Albert Edwards’ post bubble Ice Age thesis of Japanese style deflation writ large across the globe.
In this week’s Strategy Weekly, Edwards looks at the end game for his theory and it’s pretty apocalyptic stuff (again).
Think monetary debasement, competitive devaluation and a trade war. (And curiously some of themes were touched upon by Bank of England governor Mervyn King in a recent speech.)
A staggering 42 million people, more than one in eight Americans, are now on food stamps. Poverty and inequality in the US are at an all-time high. Almost half these unemployed have been jobless more than six months. This is, by any standards, still a crisis. Meanwhile, just as we are on the cusp of US unemployment rising again, trade imbalances with China are reaching new records. With China’s refusal to revalue, across-the-board tariffs beckon.
An extremely lacklustre US recovery is now being followed by a cyclical slowdown. Although it is my view that we will slide all the way back into recession, one does not have to be this gloomy to see an intolerable strain being put upon the fabric of US society where the populous is now in open political revolt. This would happen in any nation where a vision of prosperity has been shown to be a Ponzi sham, engineered by the authorities to help disguise the fact that the rich have been getting a whole lot richer. In the absence of any alternative, a desperate Fed continues these same ruinous policies. No-one should be surprised that Bernanke is trashing the dollar. We quoted him recently openly boasting in November 2002 that this is what he would do to avoid Japanese-style deflation....MORE