I was watching Bloomberg the other day. An economist was talking about what he thinks the future will hold over the next few months. He made a statement that was very profound and I thought I’d share some of what I remember from meeting him, mixed with my thoughts. I don’t remember who it was because of the huge amount of information I read/watch everyday about the economy. What he said, is still stuck in my mind, out of all the information I had acquired over the past few days. That is why I wrote this article. Although the credit goes to that person, whoever you are! I’m going to put some of his direct… quotes in… um… quotes.
“Everyone is looking for an event like Lehman” or a scandal that will simply kill the economy. I don’t think we’ll see that happen. “What we’re seeing is more cancer than a single event.” “It really happened. Obama got elected and we had Lehman.” Those were the sparks that took us into the fourth turn.
The cancer will slowly spread through several channels. The MBS mortgage scandal is massive, and will continue for 5 years or more. We will have devaluations, tariffs (trade wars), austerity, and old political alliances slowly and painfully unraveling. There is no longer a “quickly pulling the band-aid” like Lehman. The next 10 years will see a slowdown in time and the economic world will change for 98% of us.
So, let’s stop looking for an event like the crash of ’29 or the election of ’32. We had those. Let’s look at the next stages of our economic cycle. stages such as those above; Currency wars, government budget cuts, and tariff wars. On top of that, I’ll be looking for more shrinkage. I’m firmly in the deflation camp, but that’s a discussion for another article.
Hope this helps, Jim Golding