Harry Koza in the Globe and Mail quotes Bernard Connelly, the
global strategist at Banque AIG in London, who claims that the
likelihood of a Great Depression is growing by the day.
Martin Wolf, celebrated columnist of the U.K.-based Financial
Times, cites Dr. Nouriel Roubini of the New York University's Stern
School of Business, who, in 12 steps, outlines how the losses of the
American financial system will grow to more than $1 trillion - that's
one million times $1 million. That amount is equal to all the assets of
all American banks.
day now, thousands of people all over the U.S. and Great Britain are
walking away from their homes - simply mailing their house keys to the
banks - as housing bailout plans fail.
With unemployment growing, the next phase will hit commercial
real estate making the financial institutions the unwilling owners not
only of quickly depreciating houses, but also of empty strip malls and
even larger shopping centres.
The next domino to fall will be credit card defaults, and
after that... who knows? There are so many exotic funds out there, with
trillions of dollars in paper - or rather computer-screen money - all
carrying assorted acronyms, and all about to disintegrate into
nothingness. Over the next couple of years, scores of banks that have
thrived on these devices, based on quickly disappearing equities, will
The most frightening forecast so far comes from the Global
Europe Anticipation Bulletin (GEAB), available for 200 euros - about
$300 - for 16 issues annually. Its prediction is quite specific.
Where my warnings never spelled out an exact date, this think tank has it pegged precisely. Here are its very words:
"The end of the third quarter of 2008 (thus late September, a
mere seven months from now) will be marked by a new tipping point in
the unfolding of the global systemic crisis.
"At that time indeed, the cumulated impact of the various
sequences of the crisis will reach its maximum strength and affect
decisively the very heart of the systems concerned, on the front line
of which (is) the United States, epicentre of the current crisis.
"In the United States, this new tipping point will translate
into - get this - a collapse of the real economy, (the) final
socio-economic stage of the serial bursting of the housing and
financial bubbles and of the pursuance of the U.S. dollar fall. The
collapse of U.S. real economy means the virtual freeze of the American
economic machinery: private and public bankruptcies in large numbers,
companies and public services closing down."
The report goes on to say that we are entering a period for
which there is no historic precedent. Any comparisons with previous
situations in our modern economy are invalid.
We are not experiencing a "remake" of the 1929 crisis nor a repetition of the 1970s oil crises or 1987 stock market crisis.
What we will have, instead, is truly a global momentous threat -
a true turning point affecting the entire planet and questioning the
very foundations of the international system upon which the world was
organized in the last decades.
The report emphasizes that it is, first and foremost, in the
United States where this historic happening is taking an unprecedented
shape (the authors call it "Very Great U.S. Depression").
It continues to predict that, although this crucial event is
global, it will be the beginning of an economic 'decoupling' between
the U.S. and the rest of the world. However, non 'decoupled' economies
will be dragged down the U.S. negative spiral.
Concerning stock markets, the GEAB anticipates that
international stocks would plummet by 40 to 80 per cent depending where
in the world they are located, all affected in the course of the year
2008 by the collapse of the real economy in the U.S. by the end of
The European authors of this report - it appears
simultaneously in French, German and English - state that they simply
and without prejudice try to describe in advance the consequences of
the ominous trends at play in this 21st-century world, and to share
these with their readers, so that they can take the proper means to
protect themselves from the most negative effects.
So there you have it. Three reports from three different
sources, all well regarded, and all pointing to a disastrous fall-out
from our monetary moves.
This and earlier columns can be seen at hielema.ca. Comments to firstname.lastname@example.org.
(Thanks to Todd H)