Figures comparable to 1930s, “central bankers have stood in the way of recovery”
Monday, Aug 9th, 2010
The world is currently experiencing the modern day equivalent of the Great Depression, according to a prominent economist who has added his voice to scores of others now forecasting ongoing economic doom on a scale not seen since the 1930s.
Robin Griffiths, a technical strategist at Cazenove Capital, told CNBC Monday that he sees the stock market bottoming out in October as the world has entered significant financial depression.
“Equities are for losers and bond markets for winners. Equities are simply for people who like losing money,” Griffiths said.
“A double-dip is inevitable and imminent, as Keynesian stimulus measures have never worked anywhere. We are in the equivalent of a Great Depression following 3 years of credit crisis,” he added.
Griffiths also says he has charted a 20-year secular downturn in the West, which we are currently halfway through.
With real measures of unemployment having been at around 20% and rising for some time, other analysts have pointed out that the numbers are in the same ballpark as the Great Depression.
The number of Americans relying on food stamps is at a record level of over 40.8 million, that is one out of every eight, with the figure projected to rise to 43.3 million next year. At the height of the Great Depression, the rate was just one out of thirty-five Americans.
Furthermore, the M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the all the stimulus activity.
July’s dismal jobs report and forecasts of even weaker job growth ahead, along with signs of food inflation, also signals an era of stagflation is upon us, a phenomenon not seen during even the Great Depression.
Other economists are beginning to pin the blame for the continuing spiral into depression at the feet of the central bankers:
“The major problem is that quantitative easing has been counter-productive.” Brendan Brown, head of research at Mitsubishi UFJ Securities tells CNBC.
“The central banks have stopped prices from falling. When prices fall, people buy but by shoring up asset prices the central bankers have stood in the way of recovery,” he added.
“The big risk is that the Fed reacts to its own depression. The Fed could over-react and would be better off going on holiday rather than announcing yet more QE,” Brown said on the eve of a Fed meeting to discuss more QE.
This article was posted: Monday, August 9, 2010 at 9:41 am