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  1. Wealth
June 4, 2009

Pendular motion

By Spear's

The problems to come are obvious: more major losses from bad debts and unemployment, but on a huge scale

Hidden by the Credit Crunch of 2008 and the Global Recession of 2009, there has been a fundamental economic shift from the West to the East, which is now confirmed officially by the influential CEBR, The Centre for Economics and Business Research: when a think-tank sees what’s going on, it’s time for everyone else to wake up too.

Western GDP was set to fall below 50% of global GDP in 2015, but not now, as it falls to 49.4% in 2009.

That sobering fact, along with the sell-off of Barclays shares by the ADIA for a £1.54 billion profit, which calls the current top of the bank share rally, and the bankruptcies in Motown, also indicate something important as we approach the longest day of the year: stock markets bit too much into the bull before the rally was seen to be clearly an unsustainable bear in disguise.

The problems to come are obvious: more major bank losses from bad debts and unemployment, but on a huge scale: the US banks face $100 billion plus losses from credit card defaults alone; then there’s auto loans; followed by commercial property losses; and from failed buy-outs.

And BaFin, the German bank regulator, has announced that German banks face a staggering €810 billion from bad assets, as they belatedly wake up to the fact that they are in deeper manure than the Anglosphere world.

More bank bail-outs and rescue rights issues are clearly on the cards. That’s why the Arabs mounted their camels, to ride over all that liquid gold under the desert, with their western chips safely and timely encashed.

And all these further problems help swell the great lagging indicator, unemployment, which is the ultimate measure in a functioning capitalist system. This is fast becoming a number out of control across the world, which heralds civil strife in many countries, especially those without social security support, as in emerging markets, and a different pressure in those countries which do have such support systems, which will exacerbate unsustainable public deficits.

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American unemployment will shortly be over 10%, ditto Germany, while 36% of young Spaniards are out of work, over 20% of young French, while Britain braces itself for unemployment to soar through 3.0 million and beyond.

We are at the middle spike of the W and we are looking, not at a V, but at a VL, where the L replaces the right hand upright of the W and leads to Stagflation, if you see what I mean. But then I am not a think-tank, I just see the future.

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