GEAB No. 36 is available! Systemic crisis: The cumulative impact of three "rogue waves" of summer 2009
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1 - Perspective
Systemic crisis: The cumulative impact of the three rogue waves of summer 2009
As anticipated by LEAP/E2020 since October 2008, just before the summer of 2009, the question of the capacity of the United States and United Kingdom to finance their public deficits incontri now became the central issue in the international debate, thus paving the way for the dual phenomenon of a termination payment from the United States and the United Kingdom by the end of summer 2009.
So at this stage of development of the global systemic crisis, unlike the media and political discourse currently dominant, LEAP/E2020 team does not return at all after the summer 2009 (or elsewhere in the twelve months) 1. On the contrary, because of the lack of basic treatment of the underlying causes of the crisis, we believe that summer 2009 will see the convergence of three rogue waves 2 particularly destructive reflecting further deterioration of the crisis and will lead to historic changes by the month of September / October 2009.
As is the case since the beginning of this crisis, every region of the world will of course not affected in the same manière3, but for our researchers, all of them will know顃severe degradation of their situation by the late summer 20094.
This development could thus be taken up against the number of traders and financial tempted by the current euphoric media.
In this special issue of the 2009 Summer GEAB, our present course in detail these three waves converging and their destructive consequences. Details and our team concluded its strategic (gold, real estate, bonds, equities, currencies) to avoid being swept away by this summer murderer.
Thus, for LEAP/E2020 away from young shoots (green shoots) ape es for two months in all corners of tables statistiques5 by the international financial media, experts and incumbent politicians who écoutent6, the waves are ten particularly destructive socio-economic fabric that will converge during the summer of 2009, reflecting further deepening of the crisis and came ant historical upheaval at the end of summer 2009, particularly in situations of default of States U.S. and UK, both in the heart of the overall system in crisis:
1. The massive wave of chage: impact of three dates which vary according to country of America, Europe,
Asia, the Middle East and Africa 2. The wave of bankruptcies in series: Business, banking, real estate, states, regions, cities 3. The wave of the terminal crisis of U.S. Treasury bonds, the Dollar and the Pound and the return of inflationCes three waves are in fact not as successive waves called rogue three sisters "yet so destructive, they are much more dangerous because they are concurrent, asynchronous and non-parallel. Hence their impact on the global system generates dislocation they reach the different angles at different speeds, with varying strengths. The only certainty at this stage is that the international system has never been so weak and helpless when faced with such a situation:
IMF reform and global governance institutions announced G20 London remains morte7 letter, the G8 looks more and more like a moribund club that everyone wondered àquoi now it may well servir8, U.S. leadership is already a shadow of himself trying desperately to keep buyers for its bonds trésor9, the world monetary system is in full disintegration with the Russians and Chinese in particular to accelerate their game to position itself in the post-Dollar , companies see no improvement on the horizon and increase their dismissals, states increasingly struggling under the weight of their accumulated debt to save the banks and will assume a wave of bankruptcies at the end of the été10. Like the banks, moreover, who, having racked again the money of gullible investors through àl'embellie orchestrated financial markets in recent weeks, will have to re顃recognize that they are still insolvent upon late summer 2009.
In the United States as in the United Kingdom in particular, the enormous financial effort made public in 2008 and early 2009 for the sole benefit of the big banks has reached a degree of unpopularity that it had become impossible for Spring 2009 to consider new infusion of public funds for the banks always insolvables11. It then became imperative to orchestrate a beautiful fairy tale to push the average investor to inject its own money into the financial system. A stroke of green shoots, stock indexes pushed upwards without real economic foundation and early repayments of public funds, the condition was made. Thus, while the major investors in oil monarchies asiatiques12 or countries, taking advantage of the bargain, leaving the capital of the banks in question, a host of new small shareholders there came full of hope. When they discover that the repayments of public funds are a drop compared to these same banks have achieved in terms of public assistance (including to ensure their toxic assets) and that within three to up to four months (as discussed in this GEAB No. 36), these same banks will again be on the verge of collapse, they will see powerless
that their actions do nothing again.
Intoxicated by the financial, political leaders of the world will again be surprised after the summer to discover that all the problems of years past will resurface, multiply, because they have not been addressed, but just buried under immense masses of public money. Once the money squandered by insolvent banks, forced to save competitors worse than themselves, or in plans for economic stimulus difficulty cons, the problems are compounded. For hundreds of millions of people in America, Europe, Asia and Africa, summer 2009 will be a terrible transition to a sustainable loss due to the loss of their jobs with no prospect of before finding a two, three or four years, or due to the evaporation of their savings placed directly in scholarship funds in pension investment banking or related to the stock market or denominated in U.S. Dollar or British Pound; or because of their investment in enterprises forced to wait desperately brightening that will not come before long.
2 - Telescope
The three rogue waves of summer 2009
The massive wave of chage: impact of three dates which vary according to country of America, Europe, Asia, Middle East and Africa Summer 2009 will mark an inflection point in terms of impact of display on the conduct of the global systemic crisis. It is the time when a result, the display will be all over the world a factor of aggravation of the crisis. Of course this process will not take place at different speeds, or with the same effect. However, everywhere, without exception, from summer 2009 it will occupy a growing both in public opinion that in the concerns of political and economic leaders.
For LEAP/E2020, this vague general chage massive hit in three major regions of the planet:
. at the end of summer 2009 for the United States, the United Kingdom, Ireland and Spain
. at the end of the fall of 2009 for China, countries of Southeast Asia, Latin America, new EU member states, Turkey, the Middle East, Africa. in the winter of 2009/2010 for the kernel of the euro zone, Denmark, Switzerland, Sweden and Japan.
The time of impact is determined by two key parameters:
. the rise of display itself
. the quality of the social protection system of the country concerned.
As we mentioned in the Fall 2008, the countries with effective systems of compensation for the display will be able to delay the destabilizing impact of this mass display. Those who also have a system of social protection extended to mitigate
significantly this impact13.
13Etats United, United Kingdom, Ireland and Spain: the shock of massive strikes chage at the end
the summer of 2009 What is certain now is that the first wave of researchers million at the end of the compensation will hit the United States between July and September 2009. It is those who were dismissed during the fourth quarter of 2008, early dismissals with large numbers officiels14 to over 500,000 per month. The predictable failure of the economic stimulus plan of the Obama administration to create jobs provided (they n'annoncent out that creation of 150,000 jobs in three months) entered a summer social impact on a scale unknown since the Great demobilization after the Second World War: approximately 3 million researchers will fall out of the net compensation of a quarter.
With their families, are more than 10 million people will suddenly sink into the great pauvreté15. The 600,000 new jobs recently announced emergency Barack Obama, if they réalisent16, only serve to limit the margin to the socio-economic impact of this wave of researchers to drift.
This situation is especially serious because, just behind her, rush of the waves at least as big for the end of 2009. Even the most optimistic in the United States have ceased to believe in a resumption of job creation by the end of 2009. This means that over four million new scientists of the first half of 2009 and their families are arriving with no single perspective as the end of their compensation, and no job vue17. Socially and humanly, it is a tragedy that will soon eclipse the references to the Great Depression and justify the designation of Very Great U.S. Depression LEAP/E2020 that was forged early in 2007.
Economically, and we will return in the analysis of several other rogue waves, it is a destructive phenomenon for almost all sectors économiques18 including the financial sector, the seedlings will be overwhelmed by the literally millions of feet cheurs19 . Politically, it is entering a period of serious instability in the country. There is no doubt that the urgency with which Barack Obama is trying to reform the welfare system the U.S. has a close relationship with these prospects. However, we parabien illusory to think that exploit20 succeed in such a context, especially since the new U.S. president has so far not really excelled in anything other than rhetoric followed by little or no act of profound change, and it was very prisoner major lobbies, such as banks for example. In any event, according LEAP/E2020, it remains exactly three months to succeed. Then, it will lose against any illusion about the socio-political events in his country.
In the United Uni21 as Ireland and Spain, but in a monetary and political pire22, the first million new scientists generated by the crisis since mid-2008 will arrive at the end of the partial or full compensation from the end the summer and see their ranks swell rapidly in the autumn. The compensation process periods and amounts well below those of other European countries (including the nucleus of the Euro zone) argue, in fact the moment of impact and renforcent23. E in Spain in particular, very bad tourist season ahead, while tourism is one of the main principles of job creation in the country, will make summer 2009 a dramatic moment of truth for country. In contrast, Irish and British are much less likely to enjoy holidays in the summer of 2009, although it created so many jobs in their respective countries.
By September 2009 they will also face the same problem: how to manage millions of searchers without prospect of employment in the medium term without a strong social protection for them. If Ireland, because of its limited size, can expect to find support efficient c European funds, however, the size of the United Kingdom, as the multitude of crises that affect the same time leave the place that a generalized crisis in the pays24.
China, Asia and Latin America, countries of Southeast Asia, Latin America, Russia, the new EU member states, Turkey, the Middle East, Africa strikes by socio-economic consequences of the massive display in the fall of 2009 China's leaders are well aware of the explosive impact on the social and political order of the country of a mass display still crore after the summer 2009. It is for this reason that part of the economic stimulus plan involves a significant development component sociale25 protection, especially in rural areas (see GEAB No. 35). They also began to see young people everywhere to shoot their new convince consumers to eat more and more companies to undertake, but also in order to convince themselves that they are able to avoid the rupture the socio-political dam built in the 1980s between market economy and political monopoly of the Chinese Communist Party. Under pressure from approximately 50 to 100 million researchers without additional resources by the end of the fall of 2009, this dam risk of collapse suddenly. And anyway, to LEAP/E2020, the principle of boosting domestic consumption, which is challenged by the irresistible rise of the display: the millions of new researchers accumulate each month, world trade continues his descent into hell, American consumers, European and Japanese real engines of growth in China for twenty years, are themselves suffering from its display or fear. Upon return, Beijing will have as its main priority and all other files (Dollars and U.S. Treasury bonds, global warming, global governance, ...) will be submitted.
The South-East Asia, including social protection systems are also embryonic conna ra identical shock from the fall, on a continuation of the decline in exports. Latin America, who better to sort this crisis for now, will be overtaken by the fall in global conditions and massive closures of companies exporting raw materials in particular. Regional integration is not yet sufficient to offset global demand and very low social protection systems will contribute to the rapid impoverishment of large swathes of middle class South America, particularly in large cities.
Russia remains for now a follower of non-payment of salaries rather than lay-offs.
It is a method that can take longer as against official figures
chage. But as the increase in violent social conflicts and the need for direct intervention of political power at the highest level, this solution is not truly sustainable ... unless oil prices over $ 100 per barrel of by the end of summer 2009 (and with a U.S. Dollar that does not collapse at the same time) 26 and massive investment in salaries paid by the state or banks relay. In all cases, display hidden or not, absent a miracle oil, the display will be early in the fall of the central concern of MM.
Medvedev and Putin.
The new member states of the European Union will also Connar the impact of the massive display in the fall of 2009. Their social protection systems are in fact very low after a
decade of forced adaptation to neo-liberal dogma that their leaders have largely embraced with enthousiasme27. The progressive decrease in their export markets and the accelerated closure of sites offshore qu'induit the crisis, particularly in Eastern Europe, will be much longer partially offset by the relocation to nearby enterprises conducted by the European the Ouest28. Again, the summer of 2009, seeing the faint hope of a recovery in the short term, will not only increase the number of researchers but left to drift the millions of searchers accumulated for a little less than a year . Accession to the EU had already resulted in a heavy cosocial among many segments of the population of the new member states, here comes a second shock to workers and employees in particular. The only chance the people of this region, they have already had two other very brutal shock in less than twenty years (end of Communism, accession to the EU) and they are experienced. For LEAP/E2020 it is less certain that their governments are.
In the Middle East (and in the Arab world in general), the situation will become explosive chage after summer 200929. Even the rich Gulf countries will see the limits of their 'welfare state' against the backdrop of broken dreams of economic development or over-sized based on expectations of a vanished world in 2008 (and whose Duba is the most successful and most tragically in crisis) 30. Just to absorb young people entering the labor market, the Arab countries should create 3.9 million jobs each year. But in 2009, jobs are destroyed in large quantities, certainly not created.
Africa, it is directly integrated into the European Economic Area (such as North Africa for example) or indirectly (such as Africa, including through its emigration to the EU) will soon Connar l autumn 2009 a sharp rise in display (or a very sharp decline in migration to the EU) because of the continued recession in Europe. So far the impact migration has remained low because the outlook remained attractive in the medium term. And North Africa in particular has benefited, as Eastern Europe, the process of relocating near the European market. But in the absence of recovery, the context is changing. And, as regards the exploitation of raw materials, even diamonds have a lasting drop in global demand. Beyond speculation and / or transfers of the dollar to real assets such as the Beijing particular, the duration of the crisis is not a carrier for this type of economic activities. Chage and thus increased poverty are therefore to go after the summer of 2009 for Africa too.
The core of the euro area, Denmark, Switzerland, Sweden, Canada and Japan have a rendezvous with the brutal consequences of mass chage in the winter 2009/2010, only a handful of countries are still protected up 'in the fourth quarter of 2009 of the most serious display of masse31. These are the states whose systems chage compensation and welfare are the most developed, the core of the Eurozone (Germany, Netherlands, France, ...), the Scandinavian countries, Switzerland, Canada32 and Japan. They have so far registered in general increases the number of researchers proportionally much lower than other developed countries. This is particularly due to the partial compensation of the display that this situation was apparare. But in many countries this process reaches its limits in terms of budget volume (duration and number of compensation) 33. From summer 2009, we will attend, because the prospects of crisis, the strong increase in the number of new cheurs34. Then, later, in late 2009, the first million researchers in the late 2008 will begin to arrive at the end of law, overriding the other social protection and have serious fiscal imbalances in the accounts of social protection .
Moreover, in these countries as in the rest of the European Union, North America or Asia, and other countries in the northern hemisphere, between June 2009 and September 2009, tens of millions of Young, dipl or simply at the end of school age, which will arrive on the market travail35. And for the first time in modern history, from one end to another of the world, this generation will be facing a quasi-general lack of available jobs. These young people will be added this summer across the researchers described since the beginning of this chapter on the massive wave of chage. Absence of prior employment, most will not have the right to be compensated. They will strengthen the army of workers in precarious jobs (internships, work, ...) and many remain dependent on their parents, reducing the consumer trend of the latter. Even sales of video games now fortement36 fall. When an entire generation in the world, realizes that she is left out in favor of big banks and other financial institutions, it is not certain that it is content to games Video romp.
This massive wave of display will be one of the phenomena central to the process of dislocation
global geopolitical LEAP/E2020 which anticipates the beginning in the fourth quarter 200937.
The wave of bankruptcies in series:
Companies, banks, real estate, states, regions, cities massive injection of public capital in banks and major groups including cars failed to prevent bankruptcy notorious as illustrated historical bankruptcy of General Motors-United States United States (5 of the ten largest bankruptcies in U.S. history took place during the last twelve mois38) of Arcandor in Allemagne39, not counting the weekly bankruptcy of financial institutions américains40. Beyond these events very high visibility, there is everywhere a rapid and continued increase in business bankruptcies and financial institutions to large, medium or small size that will accelerate after the summer 2009, while preparing the United States, the United Kingdom and Spain in particular, a second wave of property seizures and summer 2009 will be marked by the beginning of a wave of insolvent states, regions and cities.
The young shoots of the financial media are merely hiding the leaves of the real economy.
For many companies large, medium or small, summer 2009 is as per the summer of last resort. Or, as is the case in many countries and regions, they depend on tourism as crucial and after months of lean they have a vital need for a successful summer season in 2009 to avoid bankruptcy in September, is they depend on a strong recovery in autumn, after summer, to erase the losses of 9 months (since the acceleration of the crisis in the 3 rd quarter 2009) 41. Unfortunately, according LEAP/E2020 in both cases, the recovery will not rendezvous42:
. tourists, even if they are désargentés
. consumers, they still have a salary (and hence work) are too worried about dépenser43.
At the heart of this wave, there is indeed the end of Western consumer prodigal, especially américain44 (which becomes researcher, or has fewer hours of work, or see their wages fall) 45.
We can try to boost morale in watering new positive and by hiding information inquiétantes46. It may have promised lower prices or try to revive the debt without limit. Nothing happens ... but nothing will be as reckless and that consumer credit has boosted simply disappeared: it has more money or he is too worried to do anything other than being économies47 Banks themselves insolvent may claim the contraire48, but they are unable to lend money for the passé49. So, consumers désargentés remain désargentés50. And those who have the chance to switch banks are so worried about the future, especially because of the increasing risk of chage that threat, they prefer to save rather than consume (and if they eat, do discount).
In summary, former researchers, new researchers and future researchers unconsciously conspire to kill the consumer who has owned in recent decades. No doubt this situation is a scenario of economic horror film at mondiale51. But it is not hiding the fact that managers, employees and shareholders that political leaders and economic experts and assume their financial responsibilities. How many investors, business owners and employees will find themselves destitute in a few months when the reality emerge suddenly as they had anticipated a change inverse52?
And all countries depends heavily on exports, China in the lead despite his desperate attempt to create an urgent Chinese consumer prodigal will désillusion53 Connar the same: their client yesterday no longer exists, the Western consumer is prodigal mort54. Moreover, behind the rhetoric of political leaders and financial reality is already as shown below on the evolution of the Chinese electricity consumption (the most reliable indicator of the reality of growth of the country).
This is even more serious that this wave of bankruptcies in the private sector, and its attendant massive layoffs that will strengthen the impact of the first wave analyzed in more detail in this GEAB No. 36, will strengthen the impact of wave of bankruptcies public statements, regions and cities.
For the United States and the United Kingdom, as already anticipated in previous GEAB, summer 2009 will be the time of the termination payment, we will return later. But from Mexico to Turkey through the countries of Southeast Asia and the Baltic countries, applicants for public bankruptcy are now numerous. The forms taken by these bankruptcies will be different but all revolve around three pillars: massive devaluations (held or imposed), austerity budgets (drastic reduction in salaries of civil servants, social benefits chage / pension / health, reductions in public services) , significant increases imps. All measures in these countries that kill any hope of economic recovery in the medium term (2 / 3 years), while increasing the risk of social explosion.
And of course, this will contribute significantly towards reducing the demand for goods and services in the world, continuing to depress the economies of other countries.
It is not just the states that will Connar this situation. In the federal states (or semi-federal) whose regions have substantial powers in the budgetary and fiscal, will attend the same process (except the devaluation). Already California, as a forty of the fifty states, is in such a situation. Catalonia, the richest region of Spain, is now facing a surge in the deficit will impose very unpopular measures which it is the responsibility in Madrid, as a growing number of states and U.S. cities accuse Washington indifference to his refusal to help. Beyond economic issues, these situations will severely test the strength of the bonds of solidarity in many countries, premises in some cases to process geopolitical dislocation.
Dismissal of public employees, closure of public services, reduction of contracts to private companies, ... all this will accrore even more the number of bankruptcies of companies dependent on public procurement, and therefore the number of researchers. This process has already begun and summer 2009 will see increase sharply with an acceleration in September / October 2009 when the last illusions of business leaders and public will flights.
Not only does this wave of bankruptcies will become a priority for political leaders by the end of 2009, but between doubling in direct conflict with the choice of the current massive aid to the benefit of the few establishments financiers55. Indeed, it is primarily a competition for public funds (which goes to the banks does not collectivités56, as illustrated perfectly the American situation), but then there is something predatory credit induced by the super-indebtedness of statements generated by their massive aid to banques57 (Financial markets are already and will be siphoned off even more by borrowing states). The latter, always with the United States and the United Kingdom in the heart, need to borrow in 2009/2010 more than global savings available, as already discussed in previous GEAB. So that access to finance will become increasingly difficult for operators as for businesses and local authorities (not to mention consommateurs58).
And to finish the series, the bank failures going back to the scene in the United States, the United Kingdom, Europe and Japan by the end of the summer of 2009 as all these bankruptcies, of the public and affected households are all on display for the toxic assets that are currently recorded in the positive balance of banques59. By next quarter, will be new financial bombs 60.
Last but not least, coupled with the wave of chage massive wave of bankruptcies that will greatly accelerate the rise of protectionism at the end of summer 2009, knowing that this trend is already tangible today in the United States, in China, Australia, France, ...
The wave of the terminal crisis of U.S. Treasury bonds, the dollar and pound, and the return of inflation
The first Summit of BRIC to Ekaterinebourg to know what to do with its reserves in U.S. Dollars and T-Bonds61, the decline in Chinese US62 Treasury bills, the call of the Organization for Cooperation Shanghai63 for the creation of a new international currency réserve64, the impotence of the Fed to prevent the falling prices of Treasury bills US65 and the related increase in interest rates, the systematic concerns now on the eve of sales of Treasury bills throughout the planet (and especially for at-risk countries including the United States and the United Kingdom are now), changes more abrupt currency rates on a steady depreciation of U.S. dollar, fears of Europeans of a euro bond at levels inconsistent with their exports, the crisis in the United Kingdom concerning politics, finance, economy, currency, ... all these elements are all dark clouds that accumulate in the horizon of the summer 2009. And for LEAP/E2020, they are the third wave (the third component of the sisters so dangerous for ships) which came at the end of the summer double phenomenon of cessation of payment of the United States and appeal to the IMF the United Kingdom, and by the end of the year, the beginning of the global geopolitical dislocation.
In fact, the first summit of BRIC, which is not difficult to imagine how it ad be difficult to organize, is a first sign of dislocation of the current international system. Not only the United States d do everything to prevent the meeting, but they are also denied the presence as an observer, a clear sign that what was said was not intended to be diplomatic . And the focus was certainly not a military-strategic problem, but a question monétarofinancière what to do with the hundreds of billions of U.S. Dollars (in the form of Treasury bills in particular) accumulated by the four countries in recent years?
Chinese and Russians have already found that their dollars are not necessarily welcome in the United States, Europe or Australia if they seek to invest in strategic assets 66. With the Brazilians and Indians, they have increased the swap agreements in their contracts (and this summit will accrore this) and they are trying to buy Dollars all they can as long as some countries are willing to sell their wealth in exchange for that currency. But they all know very well, on the one hand, they have too many dollars to spend valuable as the U.S. economy is contracting and the Fed to create hundreds of billions of new dollars, and secondly, that the suspicion itself vis-à-vis the currency and its assets. That's why they have decided to start another buy treasury bonds to break their dependence Treasury Bills US67. It is not at this stage to sell U.S. Treasury bonds, but it's a direct hit increased future sales of T-Bonds.
For LEAP/E2020, the summit Ekaterinebourg is probably the last effort before rupture68. If applications that are based on the reorganization faster and deeper understanding of the voting rights within the IMF and other major international organizations are not accepted and implemented quickly by the United States, Japanese and Europeans, then the next summit of BRIC summit will be a break, putting in place strategies independent, even contrary to the trio USA / Japan / EU.
With a volume of issuance of U.S. Treasury bonds is now increased to over 100 billion per month (against only 10 picks billion a month earlier), the rate of fracture s'impose naturally. As anticipated by LEAP/E2020 in GEAB earlier at the end of summer 2009 that the combination of funding needs incontri United States and the United Kingdom (increased by other pays69) and the increasing concern of potential buyers will reach its moment of truth: the need for funding will increase from 1600 billion in 2008 to 200,970 billion in 2600. And this moment of truth can only take shape: the refusal of buyers to continue to accumulate U.S. Treasury Bonds and Gilts UK. And in this sense, the decision to buy BRIC their mutual treasury bills is a sign that the first strike of buyers of U.S. Treasury Bonds currently s'étoffer71.
From there, the Fed and the Bank of England increase significantly their purchases of bonds issued by their own governments, and both currencies are plunging because of the excitement of the board to Dollars and Books, causing a rise very strength of the Euro, the Yuan, the Real ... and a bunch of other currencies. In fact, the Dollar and currency collapse affiliated with the pound against other world currencies. The devaluation dream to which many American leaders, to absorb a magic wand debt and boost U.S. exports, is carried out. And they can play the victims of wicked Chinese, Russians, etc ... facilitating the passage of protectionist measures to try to revive the U.S. industry and U.S. jobs. Of course, in this process, the Americans will see their purchasing power drastically reduced by 50%, but it is unclear whether large-world really cares about New York and Washington72.
Either Barack Obama, Timothy Geithner and Ben Bernanke to announce on television that the U.S. Dollar was devalued by 30 to 50% against major world currencies to deal with the inability of the U.S. government to reimburse the holders of bonds Trésor73 ( let us not forget that the holders of U.S. Treasury bills, Chinese-headed, have undertaken to sell their good in the medium and long terms to turn them into good for three months). This option is new dollars already raised by LEAP/E2020 in previous issues of GEAB.
The BRIC nature and have very diverse interests. But what brings them together is very powerful: it is the will of accrore place in the global governance system and the feeling that they will succeed together. They understood now that the West in general and the United States in particular have a vital need of capital they have to survive, an understanding which can only strategic thinking where short-term losses are gains in the medium term.
In this sense, the European Union to be more open to a changing world, it is a major setback if we did not know the concerns of these four powers in its proper strategy. And for the United States, the United Kingdom and Japan is a major setback as they were unable to prevent the emergence of this pe géopolitique: new index for the rapid weakening of their influence on the system mondial74 .
For our team, one of the major geopolitical consequences of this evolution is the growing autonomy of certain regional players who will find a new flexibility that had disappeared since the Cold War. The instability of explosive regions of the planet will crore in the coming months as each month brings a clearer sign of erasure of American omnipotence of the last twenty years. No doubt this will have particular influence on the rise in energy prices.
Moreover, on a termination payment of U.S. and UK and steep decline of the dollar, it is certain that the prices of raw materials denominated in U.S. Dollar and Pound Sterling are s'accrore, although related to other currencies, their courses can stagnate or even decline because of the continuing recession. Thus a market that is becoming increasingly difficult to anticipate what will not help companies already in the doldrums.
In the United States and the United Kingdom with a currency in free fall and money creation surdimensionnée75 over an economy that is contracting, the situation can only lead to a very high inflation (even hyperinflation momentary) 76. Fortunately, because of little strategic nature of their exports (the difference of energy or raw materials), that inflation will not be exportable and widely compensated for other countries, the deflationary effect of the appreciation of other currencies .
3 - Focus
Strategic recommendations for cross
meurtrier summer 2009
Currency / Gold:
The rogue waves of summer 2009 will cause severe turbulence and lead to suspension of payments by states, including the United States and United Kingdom. The currency market will be very bumpy ride. At this stage, LEAP/E2020 can not anticipate specific course because changes will be so sudden and jerky that only trends can be identified.
Thus, the U.S. Dollar and British Pound are re conna new dives. The Dollar Index will move to 0.65 and the euro-Book 1 in Book 1 Euro. The euro-dollar parity will be subject to double contradictory phenomenon in the short term: a very strong downward trend of U.S. dollar, but the Europeans will try to counter so that the Euro will become so expensive that it kills resumption of exports. For our team, we therefore turned to a non-linear fashion, to a euro / dollar rate between 1.50 and 1.60 before the suspension of U.S. payment. Once this is seen as inevitable, regardless of the action of the ECB, it will move quickly to a rate of 1 Euro = 2 U.S. Dollars.
The Real and the Yuan are still part of currency at LEAP/E2020 believes they can only grow stronger in the medium and long terms.
The currencies of mining countries such as Australia or Canada, will be weakened by the absence of recovery after the summer, but instead they will receive the effects of diversification out of U.S. Dollar (purchasing of mines, raw materials , ...). In total, they should be rather stable.
The Yen will encounter two problems related to its assessment in relation to the U.S. Dollar within the framework of payments crisis the U.S., but its heavy reliance of the United States will play in reverse. One decisive factor is the attitude of Japan in the removal from the U.S. Treasury bonds and dollar denominated assets. If this country is still stuck in the United States until the end (as shown for the moment his status as the last wildcard to save sales of U.S. Treasury Bonds), its currency will be caught in the debacle U.S. (because of its immense Dollar reserves lose between 50% and 90% of their values in a few days).
Gold will continue to remain a refuge for the coming months. We maintain our board of 30% of assets in gold (physical gold, not paper), and we recommend to have about 6 months of basic expenses or in order to cope with the currency turmoil, including at the national level. Countries who face a possible suspension of payments will indeed conna disorders monetary intense internally.
Real Estate
The markets have still not reached their lowest levels. So, ignore the advice back to purchase (unless absolutely necessary of course) issued by professionals and media.
In the United States, LEAP/E2020 believes that prices will drop on average still 20% by summer 2010 and a new wave of property seizures in large urban centers will expand the number of states strongly affected by the housing crisis.
In the United Kingdom, a similar decline is assured.
These two markets, as those countries whose currency is being devalued strongly, will become towards the end of 2009 property market particularly attractive to foreigners. But provided that they remain very vigilant on the selection of regions and districts. Do not especially shopping real estate distance as is happening now in Detroit, where buyers think make good business by buying lots of houses for $ 10,000 each. These properties are located in neighborhoods with no degradation will only increase and profitability will not be possible:
it is not because something is cheap, it is necessarily a good deal!
And remember two things in particular on the U.S. market: do not invest in condominiums (because of the risk of personal bankruptcies of other co-owners) and be very careful about the quality of buildings (especially at the end of housing bubble, the buildings, even high-end, have tended to be of poor quality).
On the London market, we must keep in mind that the reference prices of a year ago or two have no relation to the price of the future. The end of the City as it was known in the past means that there will be more (due date) as strong demand fueled by the financial bubble of remuneration and other traders hedgefunders. We must therefore set the prices of London on the future prices of comparable European cities, or have unpleasant surprises for resale in a few years.
In Spain, besides the problem of quality of recent construction, the United States, it is difficult at this stage to predict the level at which prices can fall because it is possible that this crisis simply breaks the model of tourism on which s' is based resort development Iberian. So before investing mistrust even at very low prices, unless it is through coup de coeur.
And finally, here is the tourist-board real estate in the summer of LEAP/E2020: Riga, Latvia is a beautiful city (rightly dubbed the Pearl of the Baltic Sea), which is becoming very affordable due to the country's crisis (anticipated two years ago by our team). A successful tourism can lead to an interesting real estate investment and also help the economy of this small country.
Stocks / Bonds Business:
Beware, some companies want to make gifts. Beware! Whether banks (including U.S.) that offer their shares cheap or companies offering attractive rates for their loans (such as EDF in France), it must be very careful.
Banks prepare for further losses very important by the end of 2009 and they attempted to charge small holders adding to their inevitable course next fall. As for companies that, like EDF, offer a loan at 5% over five years, while current inflation is announced around 1% to 2% when one does not deflation, they are not looking to get rich. They know very well that inflation is back (prices of products will need to mount only the unnecessary decline) and that within five years, it is even possible, given the money supply current one approaches in Europe inflation in double digits. In the United States and the United Kingdom, they will be in double digits since 2010.
Also, if you choose to live in that if you return on the stock exchange, we must be wary of three types of companies (in addition to financial):
1. those who do not have a strong balance sheet
2. those that are too recent or on markets still uncertain (the crisis would be terrible for
they lack capital to support consumers and wasteful)
3. those that are subsidiaries of American or British, as their parent homes will be even more than before forced to siphon cash to try to survive the crisis of their respective national markets. These companies will be more likely than others to make bankruptcy brutally and in any case unable to invest in the future.
Treasury Bills:
On this subject, GEAB No. 36 has already provided many elements. One should bear in mind that we must avoid at all costs the country who do not have strong public finances and / or a well-established ability to quickly increase their imps without causing a popular revolt (or actually increase their tax revenue, because taxpayers are too poor). All the rest is literature designed to make believe that nothing ever changes and that what was will be. However, we are experiencing a crisis and, in this crisis, a particular period, characterized by rapid and radical changes. Rappelezvous that last June, few people thought possible collapse of the giants of Wall Street .... Three months later, the collapse was consumed!
Today, the pressure of the crisis weighs entirely on the statements and in particular those in the heart of the system collapses, the United States and United Kingdom. Their T-Bills, which are nothing other than an acknowledgment of debt secured on their economies and their currencies, are only as good as these economies and currencies: that is to say less and less each month password. The major holders of these values in public now trying to prepare their release (as seen in the first summit of BRIC Ekaterinebourg or decline in China's U.S. Treasury bills in the month of April last). The only question for other owners is not whether but when and how large sale of U.S. Treasury Bonds (Gilts and UK) will take place. We recall that for LEAP/E2020, it will happen no later than late summer 2009. In any case, we para obvious that it is now extremely dangerous to buy.
Systemic crisis: The cumulative impact of the three rogue waves of summer 2009
As anticipated by LEAP/E2020 since October 2008, just before the summer of 2009, the question of the capacity of the United States and United Kingdom to finance their public deficits incontri now became the central issue in the international debate, thus paving the way for the dual phenomenon of a termination payment from the United States and the United Kingdom by the end of summer 2009.
So at this stage of development of the global systemic crisis, unlike the media and political discourse currently dominant, LEAP/E2020 team does not return at all after the summer 2009 (or elsewhere in the twelve months) 1. On the contrary, because of the lack of basic treatment of the underlying causes of the crisis, we believe that summer 2009 will see the convergence of three rogue waves 2 particularly destructive reflecting further deterioration of the crisis and will lead to historic changes by the month of September / October 2009.
As is the case since the beginning of this crisis, every region of the world will of course not affected in the same manière3, but for our researchers, all of them will know顃severe degradation of their situation by the late summer 20094.
This development could thus be taken up against the number of traders and financial tempted by the current euphoric media.
In this special issue of the 2009 Summer GEAB, our present course in detail these three waves converging and their destructive consequences. Details and our team concluded its strategic (gold, real estate, bonds, equities, currencies) to avoid being swept away by this summer murderer.
Thus, for LEAP/E2020 away from young shoots (green shoots) ape es for two months in all corners of tables statistiques5 by the international financial media, experts and incumbent politicians who écoutent6, the waves are ten particularly destructive socio-economic fabric that will converge during the summer of 2009, reflecting further deepening of the crisis and came ant historical upheaval at the end of summer 2009, particularly in situations of default of States U.S. and UK, both in the heart of the overall system in crisis:
1. The massive wave of chage: impact of three dates which vary according to country of America, Europe,
Asia, the Middle East and Africa 2. The wave of bankruptcies in series: Business, banking, real estate, states, regions, cities 3. The wave of the terminal crisis of U.S. Treasury bonds, the Dollar and the Pound and the return of inflationCes three waves are in fact not as successive waves called rogue three sisters "yet so destructive, they are much more dangerous because they are concurrent, asynchronous and non-parallel. Hence their impact on the global system generates dislocation they reach the different angles at different speeds, with varying strengths. The only certainty at this stage is that the international system has never been so weak and helpless when faced with such a situation:
IMF reform and global governance institutions announced G20 London remains morte7 letter, the G8 looks more and more like a moribund club that everyone wondered àquoi now it may well servir8, U.S. leadership is already a shadow of himself trying desperately to keep buyers for its bonds trésor9, the world monetary system is in full disintegration with the Russians and Chinese in particular to accelerate their game to position itself in the post-Dollar , companies see no improvement on the horizon and increase their dismissals, states increasingly struggling under the weight of their accumulated debt to save the banks and will assume a wave of bankruptcies at the end of the été10. Like the banks, moreover, who, having racked again the money of gullible investors through àl'embellie orchestrated financial markets in recent weeks, will have to re顃recognize that they are still insolvent upon late summer 2009.
In the United States as in the United Kingdom in particular, the enormous financial effort made public in 2008 and early 2009 for the sole benefit of the big banks has reached a degree of unpopularity that it had become impossible for Spring 2009 to consider new infusion of public funds for the banks always insolvables11. It then became imperative to orchestrate a beautiful fairy tale to push the average investor to inject its own money into the financial system. A stroke of green shoots, stock indexes pushed upwards without real economic foundation and early repayments of public funds, the condition was made. Thus, while the major investors in oil monarchies asiatiques12 or countries, taking advantage of the bargain, leaving the capital of the banks in question, a host of new small shareholders there came full of hope. When they discover that the repayments of public funds are a drop compared to these same banks have achieved in terms of public assistance (including to ensure their toxic assets) and that within three to up to four months (as discussed in this GEAB No. 36), these same banks will again be on the verge of collapse, they will see powerless
that their actions do nothing again.
Intoxicated by the financial, political leaders of the world will again be surprised after the summer to discover that all the problems of years past will resurface, multiply, because they have not been addressed, but just buried under immense masses of public money. Once the money squandered by insolvent banks, forced to save competitors worse than themselves, or in plans for economic stimulus difficulty cons, the problems are compounded. For hundreds of millions of people in America, Europe, Asia and Africa, summer 2009 will be a terrible transition to a sustainable loss due to the loss of their jobs with no prospect of before finding a two, three or four years, or due to the evaporation of their savings placed directly in scholarship funds in pension investment banking or related to the stock market or denominated in U.S. Dollar or British Pound; or because of their investment in enterprises forced to wait desperately brightening that will not come before long.
2 - Telescope
The three rogue waves of summer 2009
The massive wave of chage: impact of three dates which vary according to country of America, Europe, Asia, Middle East and Africa Summer 2009 will mark an inflection point in terms of impact of display on the conduct of the global systemic crisis. It is the time when a result, the display will be all over the world a factor of aggravation of the crisis. Of course this process will not take place at different speeds, or with the same effect. However, everywhere, without exception, from summer 2009 it will occupy a growing both in public opinion that in the concerns of political and economic leaders.
For LEAP/E2020, this vague general chage massive hit in three major regions of the planet:
. at the end of summer 2009 for the United States, the United Kingdom, Ireland and Spain
. at the end of the fall of 2009 for China, countries of Southeast Asia, Latin America, new EU member states, Turkey, the Middle East, Africa. in the winter of 2009/2010 for the kernel of the euro zone, Denmark, Switzerland, Sweden and Japan.
The time of impact is determined by two key parameters:
. the rise of display itself
. the quality of the social protection system of the country concerned.
As we mentioned in the Fall 2008, the countries with effective systems of compensation for the display will be able to delay the destabilizing impact of this mass display. Those who also have a system of social protection extended to mitigate
significantly this impact13.
13Etats United, United Kingdom, Ireland and Spain: the shock of massive strikes chage at the end
the summer of 2009 What is certain now is that the first wave of researchers million at the end of the compensation will hit the United States between July and September 2009. It is those who were dismissed during the fourth quarter of 2008, early dismissals with large numbers officiels14 to over 500,000 per month. The predictable failure of the economic stimulus plan of the Obama administration to create jobs provided (they n'annoncent out that creation of 150,000 jobs in three months) entered a summer social impact on a scale unknown since the Great demobilization after the Second World War: approximately 3 million researchers will fall out of the net compensation of a quarter.
With their families, are more than 10 million people will suddenly sink into the great pauvreté15. The 600,000 new jobs recently announced emergency Barack Obama, if they réalisent16, only serve to limit the margin to the socio-economic impact of this wave of researchers to drift.
This situation is especially serious because, just behind her, rush of the waves at least as big for the end of 2009. Even the most optimistic in the United States have ceased to believe in a resumption of job creation by the end of 2009. This means that over four million new scientists of the first half of 2009 and their families are arriving with no single perspective as the end of their compensation, and no job vue17. Socially and humanly, it is a tragedy that will soon eclipse the references to the Great Depression and justify the designation of Very Great U.S. Depression LEAP/E2020 that was forged early in 2007.
Economically, and we will return in the analysis of several other rogue waves, it is a destructive phenomenon for almost all sectors économiques18 including the financial sector, the seedlings will be overwhelmed by the literally millions of feet cheurs19 . Politically, it is entering a period of serious instability in the country. There is no doubt that the urgency with which Barack Obama is trying to reform the welfare system the U.S. has a close relationship with these prospects. However, we parabien illusory to think that exploit20 succeed in such a context, especially since the new U.S. president has so far not really excelled in anything other than rhetoric followed by little or no act of profound change, and it was very prisoner major lobbies, such as banks for example. In any event, according LEAP/E2020, it remains exactly three months to succeed. Then, it will lose against any illusion about the socio-political events in his country.
In the United Uni21 as Ireland and Spain, but in a monetary and political pire22, the first million new scientists generated by the crisis since mid-2008 will arrive at the end of the partial or full compensation from the end the summer and see their ranks swell rapidly in the autumn. The compensation process periods and amounts well below those of other European countries (including the nucleus of the Euro zone) argue, in fact the moment of impact and renforcent23. E in Spain in particular, very bad tourist season ahead, while tourism is one of the main principles of job creation in the country, will make summer 2009 a dramatic moment of truth for country. In contrast, Irish and British are much less likely to enjoy holidays in the summer of 2009, although it created so many jobs in their respective countries.
By September 2009 they will also face the same problem: how to manage millions of searchers without prospect of employment in the medium term without a strong social protection for them. If Ireland, because of its limited size, can expect to find support efficient c European funds, however, the size of the United Kingdom, as the multitude of crises that affect the same time leave the place that a generalized crisis in the pays24.
China, Asia and Latin America, countries of Southeast Asia, Latin America, Russia, the new EU member states, Turkey, the Middle East, Africa strikes by socio-economic consequences of the massive display in the fall of 2009 China's leaders are well aware of the explosive impact on the social and political order of the country of a mass display still crore after the summer 2009. It is for this reason that part of the economic stimulus plan involves a significant development component sociale25 protection, especially in rural areas (see GEAB No. 35). They also began to see young people everywhere to shoot their new convince consumers to eat more and more companies to undertake, but also in order to convince themselves that they are able to avoid the rupture the socio-political dam built in the 1980s between market economy and political monopoly of the Chinese Communist Party. Under pressure from approximately 50 to 100 million researchers without additional resources by the end of the fall of 2009, this dam risk of collapse suddenly. And anyway, to LEAP/E2020, the principle of boosting domestic consumption, which is challenged by the irresistible rise of the display: the millions of new researchers accumulate each month, world trade continues his descent into hell, American consumers, European and Japanese real engines of growth in China for twenty years, are themselves suffering from its display or fear. Upon return, Beijing will have as its main priority and all other files (Dollars and U.S. Treasury bonds, global warming, global governance, ...) will be submitted.
The South-East Asia, including social protection systems are also embryonic conna ra identical shock from the fall, on a continuation of the decline in exports. Latin America, who better to sort this crisis for now, will be overtaken by the fall in global conditions and massive closures of companies exporting raw materials in particular. Regional integration is not yet sufficient to offset global demand and very low social protection systems will contribute to the rapid impoverishment of large swathes of middle class South America, particularly in large cities.
Russia remains for now a follower of non-payment of salaries rather than lay-offs.
It is a method that can take longer as against official figures
chage. But as the increase in violent social conflicts and the need for direct intervention of political power at the highest level, this solution is not truly sustainable ... unless oil prices over $ 100 per barrel of by the end of summer 2009 (and with a U.S. Dollar that does not collapse at the same time) 26 and massive investment in salaries paid by the state or banks relay. In all cases, display hidden or not, absent a miracle oil, the display will be early in the fall of the central concern of MM.
Medvedev and Putin.
The new member states of the European Union will also Connar the impact of the massive display in the fall of 2009. Their social protection systems are in fact very low after a
decade of forced adaptation to neo-liberal dogma that their leaders have largely embraced with enthousiasme27. The progressive decrease in their export markets and the accelerated closure of sites offshore qu'induit the crisis, particularly in Eastern Europe, will be much longer partially offset by the relocation to nearby enterprises conducted by the European the Ouest28. Again, the summer of 2009, seeing the faint hope of a recovery in the short term, will not only increase the number of researchers but left to drift the millions of searchers accumulated for a little less than a year . Accession to the EU had already resulted in a heavy cosocial among many segments of the population of the new member states, here comes a second shock to workers and employees in particular. The only chance the people of this region, they have already had two other very brutal shock in less than twenty years (end of Communism, accession to the EU) and they are experienced. For LEAP/E2020 it is less certain that their governments are.
In the Middle East (and in the Arab world in general), the situation will become explosive chage after summer 200929. Even the rich Gulf countries will see the limits of their 'welfare state' against the backdrop of broken dreams of economic development or over-sized based on expectations of a vanished world in 2008 (and whose Duba is the most successful and most tragically in crisis) 30. Just to absorb young people entering the labor market, the Arab countries should create 3.9 million jobs each year. But in 2009, jobs are destroyed in large quantities, certainly not created.
Africa, it is directly integrated into the European Economic Area (such as North Africa for example) or indirectly (such as Africa, including through its emigration to the EU) will soon Connar l autumn 2009 a sharp rise in display (or a very sharp decline in migration to the EU) because of the continued recession in Europe. So far the impact migration has remained low because the outlook remained attractive in the medium term. And North Africa in particular has benefited, as Eastern Europe, the process of relocating near the European market. But in the absence of recovery, the context is changing. And, as regards the exploitation of raw materials, even diamonds have a lasting drop in global demand. Beyond speculation and / or transfers of the dollar to real assets such as the Beijing particular, the duration of the crisis is not a carrier for this type of economic activities. Chage and thus increased poverty are therefore to go after the summer of 2009 for Africa too.
The core of the euro area, Denmark, Switzerland, Sweden, Canada and Japan have a rendezvous with the brutal consequences of mass chage in the winter 2009/2010, only a handful of countries are still protected up 'in the fourth quarter of 2009 of the most serious display of masse31. These are the states whose systems chage compensation and welfare are the most developed, the core of the Eurozone (Germany, Netherlands, France, ...), the Scandinavian countries, Switzerland, Canada32 and Japan. They have so far registered in general increases the number of researchers proportionally much lower than other developed countries. This is particularly due to the partial compensation of the display that this situation was apparare. But in many countries this process reaches its limits in terms of budget volume (duration and number of compensation) 33. From summer 2009, we will attend, because the prospects of crisis, the strong increase in the number of new cheurs34. Then, later, in late 2009, the first million researchers in the late 2008 will begin to arrive at the end of law, overriding the other social protection and have serious fiscal imbalances in the accounts of social protection .
Moreover, in these countries as in the rest of the European Union, North America or Asia, and other countries in the northern hemisphere, between June 2009 and September 2009, tens of millions of Young, dipl or simply at the end of school age, which will arrive on the market travail35. And for the first time in modern history, from one end to another of the world, this generation will be facing a quasi-general lack of available jobs. These young people will be added this summer across the researchers described since the beginning of this chapter on the massive wave of chage. Absence of prior employment, most will not have the right to be compensated. They will strengthen the army of workers in precarious jobs (internships, work, ...) and many remain dependent on their parents, reducing the consumer trend of the latter. Even sales of video games now fortement36 fall. When an entire generation in the world, realizes that she is left out in favor of big banks and other financial institutions, it is not certain that it is content to games Video romp.
This massive wave of display will be one of the phenomena central to the process of dislocation
global geopolitical LEAP/E2020 which anticipates the beginning in the fourth quarter 200937.
The wave of bankruptcies in series:
Companies, banks, real estate, states, regions, cities massive injection of public capital in banks and major groups including cars failed to prevent bankruptcy notorious as illustrated historical bankruptcy of General Motors-United States United States (5 of the ten largest bankruptcies in U.S. history took place during the last twelve mois38) of Arcandor in Allemagne39, not counting the weekly bankruptcy of financial institutions américains40. Beyond these events very high visibility, there is everywhere a rapid and continued increase in business bankruptcies and financial institutions to large, medium or small size that will accelerate after the summer 2009, while preparing the United States, the United Kingdom and Spain in particular, a second wave of property seizures and summer 2009 will be marked by the beginning of a wave of insolvent states, regions and cities.
The young shoots of the financial media are merely hiding the leaves of the real economy.
For many companies large, medium or small, summer 2009 is as per the summer of last resort. Or, as is the case in many countries and regions, they depend on tourism as crucial and after months of lean they have a vital need for a successful summer season in 2009 to avoid bankruptcy in September, is they depend on a strong recovery in autumn, after summer, to erase the losses of 9 months (since the acceleration of the crisis in the 3 rd quarter 2009) 41. Unfortunately, according LEAP/E2020 in both cases, the recovery will not rendezvous42:
. tourists, even if they are désargentés
. consumers, they still have a salary (and hence work) are too worried about dépenser43.
At the heart of this wave, there is indeed the end of Western consumer prodigal, especially américain44 (which becomes researcher, or has fewer hours of work, or see their wages fall) 45.
We can try to boost morale in watering new positive and by hiding information inquiétantes46. It may have promised lower prices or try to revive the debt without limit. Nothing happens ... but nothing will be as reckless and that consumer credit has boosted simply disappeared: it has more money or he is too worried to do anything other than being économies47 Banks themselves insolvent may claim the contraire48, but they are unable to lend money for the passé49. So, consumers désargentés remain désargentés50. And those who have the chance to switch banks are so worried about the future, especially because of the increasing risk of chage that threat, they prefer to save rather than consume (and if they eat, do discount).
In summary, former researchers, new researchers and future researchers unconsciously conspire to kill the consumer who has owned in recent decades. No doubt this situation is a scenario of economic horror film at mondiale51. But it is not hiding the fact that managers, employees and shareholders that political leaders and economic experts and assume their financial responsibilities. How many investors, business owners and employees will find themselves destitute in a few months when the reality emerge suddenly as they had anticipated a change inverse52?
And all countries depends heavily on exports, China in the lead despite his desperate attempt to create an urgent Chinese consumer prodigal will désillusion53 Connar the same: their client yesterday no longer exists, the Western consumer is prodigal mort54. Moreover, behind the rhetoric of political leaders and financial reality is already as shown below on the evolution of the Chinese electricity consumption (the most reliable indicator of the reality of growth of the country).
This is even more serious that this wave of bankruptcies in the private sector, and its attendant massive layoffs that will strengthen the impact of the first wave analyzed in more detail in this GEAB No. 36, will strengthen the impact of wave of bankruptcies public statements, regions and cities.
For the United States and the United Kingdom, as already anticipated in previous GEAB, summer 2009 will be the time of the termination payment, we will return later. But from Mexico to Turkey through the countries of Southeast Asia and the Baltic countries, applicants for public bankruptcy are now numerous. The forms taken by these bankruptcies will be different but all revolve around three pillars: massive devaluations (held or imposed), austerity budgets (drastic reduction in salaries of civil servants, social benefits chage / pension / health, reductions in public services) , significant increases imps. All measures in these countries that kill any hope of economic recovery in the medium term (2 / 3 years), while increasing the risk of social explosion.
And of course, this will contribute significantly towards reducing the demand for goods and services in the world, continuing to depress the economies of other countries.
It is not just the states that will Connar this situation. In the federal states (or semi-federal) whose regions have substantial powers in the budgetary and fiscal, will attend the same process (except the devaluation). Already California, as a forty of the fifty states, is in such a situation. Catalonia, the richest region of Spain, is now facing a surge in the deficit will impose very unpopular measures which it is the responsibility in Madrid, as a growing number of states and U.S. cities accuse Washington indifference to his refusal to help. Beyond economic issues, these situations will severely test the strength of the bonds of solidarity in many countries, premises in some cases to process geopolitical dislocation.
Dismissal of public employees, closure of public services, reduction of contracts to private companies, ... all this will accrore even more the number of bankruptcies of companies dependent on public procurement, and therefore the number of researchers. This process has already begun and summer 2009 will see increase sharply with an acceleration in September / October 2009 when the last illusions of business leaders and public will flights.
Not only does this wave of bankruptcies will become a priority for political leaders by the end of 2009, but between doubling in direct conflict with the choice of the current massive aid to the benefit of the few establishments financiers55. Indeed, it is primarily a competition for public funds (which goes to the banks does not collectivités56, as illustrated perfectly the American situation), but then there is something predatory credit induced by the super-indebtedness of statements generated by their massive aid to banques57 (Financial markets are already and will be siphoned off even more by borrowing states). The latter, always with the United States and the United Kingdom in the heart, need to borrow in 2009/2010 more than global savings available, as already discussed in previous GEAB. So that access to finance will become increasingly difficult for operators as for businesses and local authorities (not to mention consommateurs58).
And to finish the series, the bank failures going back to the scene in the United States, the United Kingdom, Europe and Japan by the end of the summer of 2009 as all these bankruptcies, of the public and affected households are all on display for the toxic assets that are currently recorded in the positive balance of banques59. By next quarter, will be new financial bombs 60.
Last but not least, coupled with the wave of chage massive wave of bankruptcies that will greatly accelerate the rise of protectionism at the end of summer 2009, knowing that this trend is already tangible today in the United States, in China, Australia, France, ...
The wave of the terminal crisis of U.S. Treasury bonds, the dollar and pound, and the return of inflation
The first Summit of BRIC to Ekaterinebourg to know what to do with its reserves in U.S. Dollars and T-Bonds61, the decline in Chinese US62 Treasury bills, the call of the Organization for Cooperation Shanghai63 for the creation of a new international currency réserve64, the impotence of the Fed to prevent the falling prices of Treasury bills US65 and the related increase in interest rates, the systematic concerns now on the eve of sales of Treasury bills throughout the planet (and especially for at-risk countries including the United States and the United Kingdom are now), changes more abrupt currency rates on a steady depreciation of U.S. dollar, fears of Europeans of a euro bond at levels inconsistent with their exports, the crisis in the United Kingdom concerning politics, finance, economy, currency, ... all these elements are all dark clouds that accumulate in the horizon of the summer 2009. And for LEAP/E2020, they are the third wave (the third component of the sisters so dangerous for ships) which came at the end of the summer double phenomenon of cessation of payment of the United States and appeal to the IMF the United Kingdom, and by the end of the year, the beginning of the global geopolitical dislocation.
In fact, the first summit of BRIC, which is not difficult to imagine how it ad be difficult to organize, is a first sign of dislocation of the current international system. Not only the United States d do everything to prevent the meeting, but they are also denied the presence as an observer, a clear sign that what was said was not intended to be diplomatic . And the focus was certainly not a military-strategic problem, but a question monétarofinancière what to do with the hundreds of billions of U.S. Dollars (in the form of Treasury bills in particular) accumulated by the four countries in recent years?
Chinese and Russians have already found that their dollars are not necessarily welcome in the United States, Europe or Australia if they seek to invest in strategic assets 66. With the Brazilians and Indians, they have increased the swap agreements in their contracts (and this summit will accrore this) and they are trying to buy Dollars all they can as long as some countries are willing to sell their wealth in exchange for that currency. But they all know very well, on the one hand, they have too many dollars to spend valuable as the U.S. economy is contracting and the Fed to create hundreds of billions of new dollars, and secondly, that the suspicion itself vis-à-vis the currency and its assets. That's why they have decided to start another buy treasury bonds to break their dependence Treasury Bills US67. It is not at this stage to sell U.S. Treasury bonds, but it's a direct hit increased future sales of T-Bonds.
For LEAP/E2020, the summit Ekaterinebourg is probably the last effort before rupture68. If applications that are based on the reorganization faster and deeper understanding of the voting rights within the IMF and other major international organizations are not accepted and implemented quickly by the United States, Japanese and Europeans, then the next summit of BRIC summit will be a break, putting in place strategies independent, even contrary to the trio USA / Japan / EU.
With a volume of issuance of U.S. Treasury bonds is now increased to over 100 billion per month (against only 10 picks billion a month earlier), the rate of fracture s'impose naturally. As anticipated by LEAP/E2020 in GEAB earlier at the end of summer 2009 that the combination of funding needs incontri United States and the United Kingdom (increased by other pays69) and the increasing concern of potential buyers will reach its moment of truth: the need for funding will increase from 1600 billion in 2008 to 200,970 billion in 2600. And this moment of truth can only take shape: the refusal of buyers to continue to accumulate U.S. Treasury Bonds and Gilts UK. And in this sense, the decision to buy BRIC their mutual treasury bills is a sign that the first strike of buyers of U.S. Treasury Bonds currently s'étoffer71.
From there, the Fed and the Bank of England increase significantly their purchases of bonds issued by their own governments, and both currencies are plunging because of the excitement of the board to Dollars and Books, causing a rise very strength of the Euro, the Yuan, the Real ... and a bunch of other currencies. In fact, the Dollar and currency collapse affiliated with the pound against other world currencies. The devaluation dream to which many American leaders, to absorb a magic wand debt and boost U.S. exports, is carried out. And they can play the victims of wicked Chinese, Russians, etc ... facilitating the passage of protectionist measures to try to revive the U.S. industry and U.S. jobs. Of course, in this process, the Americans will see their purchasing power drastically reduced by 50%, but it is unclear whether large-world really cares about New York and Washington72.
Either Barack Obama, Timothy Geithner and Ben Bernanke to announce on television that the U.S. Dollar was devalued by 30 to 50% against major world currencies to deal with the inability of the U.S. government to reimburse the holders of bonds Trésor73 ( let us not forget that the holders of U.S. Treasury bills, Chinese-headed, have undertaken to sell their good in the medium and long terms to turn them into good for three months). This option is new dollars already raised by LEAP/E2020 in previous issues of GEAB.
The BRIC nature and have very diverse interests. But what brings them together is very powerful: it is the will of accrore place in the global governance system and the feeling that they will succeed together. They understood now that the West in general and the United States in particular have a vital need of capital they have to survive, an understanding which can only strategic thinking where short-term losses are gains in the medium term.
In this sense, the European Union to be more open to a changing world, it is a major setback if we did not know the concerns of these four powers in its proper strategy. And for the United States, the United Kingdom and Japan is a major setback as they were unable to prevent the emergence of this pe géopolitique: new index for the rapid weakening of their influence on the system mondial74 .
For our team, one of the major geopolitical consequences of this evolution is the growing autonomy of certain regional players who will find a new flexibility that had disappeared since the Cold War. The instability of explosive regions of the planet will crore in the coming months as each month brings a clearer sign of erasure of American omnipotence of the last twenty years. No doubt this will have particular influence on the rise in energy prices.
Moreover, on a termination payment of U.S. and UK and steep decline of the dollar, it is certain that the prices of raw materials denominated in U.S. Dollar and Pound Sterling are s'accrore, although related to other currencies, their courses can stagnate or even decline because of the continuing recession. Thus a market that is becoming increasingly difficult to anticipate what will not help companies already in the doldrums.
In the United States and the United Kingdom with a currency in free fall and money creation surdimensionnée75 over an economy that is contracting, the situation can only lead to a very high inflation (even hyperinflation momentary) 76. Fortunately, because of little strategic nature of their exports (the difference of energy or raw materials), that inflation will not be exportable and widely compensated for other countries, the deflationary effect of the appreciation of other currencies .
3 - Focus
Strategic recommendations for cross
meurtrier summer 2009
Currency / Gold:
The rogue waves of summer 2009 will cause severe turbulence and lead to suspension of payments by states, including the United States and United Kingdom. The currency market will be very bumpy ride. At this stage, LEAP/E2020 can not anticipate specific course because changes will be so sudden and jerky that only trends can be identified.
Thus, the U.S. Dollar and British Pound are re conna new dives. The Dollar Index will move to 0.65 and the euro-Book 1 in Book 1 Euro. The euro-dollar parity will be subject to double contradictory phenomenon in the short term: a very strong downward trend of U.S. dollar, but the Europeans will try to counter so that the Euro will become so expensive that it kills resumption of exports. For our team, we therefore turned to a non-linear fashion, to a euro / dollar rate between 1.50 and 1.60 before the suspension of U.S. payment. Once this is seen as inevitable, regardless of the action of the ECB, it will move quickly to a rate of 1 Euro = 2 U.S. Dollars.
The Real and the Yuan are still part of currency at LEAP/E2020 believes they can only grow stronger in the medium and long terms.
The currencies of mining countries such as Australia or Canada, will be weakened by the absence of recovery after the summer, but instead they will receive the effects of diversification out of U.S. Dollar (purchasing of mines, raw materials , ...). In total, they should be rather stable.
The Yen will encounter two problems related to its assessment in relation to the U.S. Dollar within the framework of payments crisis the U.S., but its heavy reliance of the United States will play in reverse. One decisive factor is the attitude of Japan in the removal from the U.S. Treasury bonds and dollar denominated assets. If this country is still stuck in the United States until the end (as shown for the moment his status as the last wildcard to save sales of U.S. Treasury Bonds), its currency will be caught in the debacle U.S. (because of its immense Dollar reserves lose between 50% and 90% of their values in a few days).
Gold will continue to remain a refuge for the coming months. We maintain our board of 30% of assets in gold (physical gold, not paper), and we recommend to have about 6 months of basic expenses or in order to cope with the currency turmoil, including at the national level. Countries who face a possible suspension of payments will indeed conna disorders monetary intense internally.
Real Estate
The markets have still not reached their lowest levels. So, ignore the advice back to purchase (unless absolutely necessary of course) issued by professionals and media.
In the United States, LEAP/E2020 believes that prices will drop on average still 20% by summer 2010 and a new wave of property seizures in large urban centers will expand the number of states strongly affected by the housing crisis.
In the United Kingdom, a similar decline is assured.
These two markets, as those countries whose currency is being devalued strongly, will become towards the end of 2009 property market particularly attractive to foreigners. But provided that they remain very vigilant on the selection of regions and districts. Do not especially shopping real estate distance as is happening now in Detroit, where buyers think make good business by buying lots of houses for $ 10,000 each. These properties are located in neighborhoods with no degradation will only increase and profitability will not be possible:
it is not because something is cheap, it is necessarily a good deal!
And remember two things in particular on the U.S. market: do not invest in condominiums (because of the risk of personal bankruptcies of other co-owners) and be very careful about the quality of buildings (especially at the end of housing bubble, the buildings, even high-end, have tended to be of poor quality).
On the London market, we must keep in mind that the reference prices of a year ago or two have no relation to the price of the future. The end of the City as it was known in the past means that there will be more (due date) as strong demand fueled by the financial bubble of remuneration and other traders hedgefunders. We must therefore set the prices of London on the future prices of comparable European cities, or have unpleasant surprises for resale in a few years.
In Spain, besides the problem of quality of recent construction, the United States, it is difficult at this stage to predict the level at which prices can fall because it is possible that this crisis simply breaks the model of tourism on which s' is based resort development Iberian. So before investing mistrust even at very low prices, unless it is through coup de coeur.
And finally, here is the tourist-board real estate in the summer of LEAP/E2020: Riga, Latvia is a beautiful city (rightly dubbed the Pearl of the Baltic Sea), which is becoming very affordable due to the country's crisis (anticipated two years ago by our team). A successful tourism can lead to an interesting real estate investment and also help the economy of this small country.
Stocks / Bonds Business:
Beware, some companies want to make gifts. Beware! Whether banks (including U.S.) that offer their shares cheap or companies offering attractive rates for their loans (such as EDF in France), it must be very careful.
Banks prepare for further losses very important by the end of 2009 and they attempted to charge small holders adding to their inevitable course next fall. As for companies that, like EDF, offer a loan at 5% over five years, while current inflation is announced around 1% to 2% when one does not deflation, they are not looking to get rich. They know very well that inflation is back (prices of products will need to mount only the unnecessary decline) and that within five years, it is even possible, given the money supply current one approaches in Europe inflation in double digits. In the United States and the United Kingdom, they will be in double digits since 2010.
Also, if you choose to live in that if you return on the stock exchange, we must be wary of three types of companies (in addition to financial):
1. those who do not have a strong balance sheet
2. those that are too recent or on markets still uncertain (the crisis would be terrible for
they lack capital to support consumers and wasteful)
3. those that are subsidiaries of American or British, as their parent homes will be even more than before forced to siphon cash to try to survive the crisis of their respective national markets. These companies will be more likely than others to make bankruptcy brutally and in any case unable to invest in the future.
Treasury Bills:
On this subject, GEAB No. 36 has already provided many elements. One should bear in mind that we must avoid at all costs the country who do not have strong public finances and / or a well-established ability to quickly increase their imps without causing a popular revolt (or actually increase their tax revenue, because taxpayers are too poor). All the rest is literature designed to make believe that nothing ever changes and that what was will be. However, we are experiencing a crisis and, in this crisis, a particular period, characterized by rapid and radical changes. Rappelezvous that last June, few people thought possible collapse of the giants of Wall Street .... Three months later, the collapse was consumed!
Today, the pressure of the crisis weighs entirely on the statements and in particular those in the heart of the system collapses, the United States and United Kingdom. Their T-Bills, which are nothing other than an acknowledgment of debt secured on their economies and their currencies, are only as good as these economies and currencies: that is to say less and less each month password. The major holders of these values in public now trying to prepare their release (as seen in the first summit of BRIC Ekaterinebourg or decline in China's U.S. Treasury bills in the month of April last). The only question for other owners is not whether but when and how large sale of U.S. Treasury Bonds (Gilts and UK) will take place. We recall that for LEAP/E2020, it will happen no later than late summer 2009. In any case, we para obvious that it is now extremely dangerous to buy.
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