Second Market Crash Signals Dreaded Double Dip Recession
Markets round the world this week have been taking another tumble, less than two years since the crisis of 2008.
Bank debt has been translated into sovereign debt, a much tougher animal to tame.
National debt of this scale up until recently was only associated with the Third World.
Now it has come home to roost.
This seems to signal the dreaded double dip that bearish commentators have been fearing for so long.
Since it was only the prospect of a recovery that fuelled markets over the last couple of years, what will happen now that confidence has gone? To get some idea of the scale of the problem, it is worth reminding ourselves of the problem of Third World debt that "plagued" politicians of the West for years.
Over three decades Western nations collected around half a trillion dollars in interest and principal from Third World countries, and still the debt remained at the same level, around half a trillion dollars (source: globalissues.
org).
No one knows for sure what the total global bailout figure is around the world today, money spent on recovering folding banks and financial institutions who were responsible for the crisis in the first place, but it definitely runs into the many trillions.
Such an astronomical figure (plus interest) would be hard enough for the West to repay given "normal economic conditions", ie low inflation levels, high employment and a stable property market, but with all these three indicators showing adverse trends, ie rising inflation, rising unemployment and a property market that has all but been blown out of the water, there really is no possibility of even touching the debt.
Some would say that it is a form of justice that those who for so long made the Third World suffer, and those who invented the scandal of sub prime, should now be faced with the same impossible conditions of repayment that they imposed on others.
But the fact of the matter is, we would all rather see things resolved, than suffer the consequences.
We have had double dips before, but never without any foreseeable options for rescue.
The new coalition government in the UK is ill-equipped to handle the crisis, fraught with their own internal tensions, and the eviction from number 10 of the one man who seemed to know what he was doing, Gordon Brown, does not bode well.
His advice against tampering with cuts to the deficit now so as not to inhibit economic recovery seems sound given the outcome this week.
My guess is that governments all around the world should take Brown´s advice and instead of talking about austerity measures to repay debt, should be seeking stimuli for growth and regeneration.
Bank debt has been translated into sovereign debt, a much tougher animal to tame.
National debt of this scale up until recently was only associated with the Third World.
Now it has come home to roost.
This seems to signal the dreaded double dip that bearish commentators have been fearing for so long.
Since it was only the prospect of a recovery that fuelled markets over the last couple of years, what will happen now that confidence has gone? To get some idea of the scale of the problem, it is worth reminding ourselves of the problem of Third World debt that "plagued" politicians of the West for years.
Over three decades Western nations collected around half a trillion dollars in interest and principal from Third World countries, and still the debt remained at the same level, around half a trillion dollars (source: globalissues.
org).
No one knows for sure what the total global bailout figure is around the world today, money spent on recovering folding banks and financial institutions who were responsible for the crisis in the first place, but it definitely runs into the many trillions.
Such an astronomical figure (plus interest) would be hard enough for the West to repay given "normal economic conditions", ie low inflation levels, high employment and a stable property market, but with all these three indicators showing adverse trends, ie rising inflation, rising unemployment and a property market that has all but been blown out of the water, there really is no possibility of even touching the debt.
Some would say that it is a form of justice that those who for so long made the Third World suffer, and those who invented the scandal of sub prime, should now be faced with the same impossible conditions of repayment that they imposed on others.
But the fact of the matter is, we would all rather see things resolved, than suffer the consequences.
We have had double dips before, but never without any foreseeable options for rescue.
The new coalition government in the UK is ill-equipped to handle the crisis, fraught with their own internal tensions, and the eviction from number 10 of the one man who seemed to know what he was doing, Gordon Brown, does not bode well.
His advice against tampering with cuts to the deficit now so as not to inhibit economic recovery seems sound given the outcome this week.
My guess is that governments all around the world should take Brown´s advice and instead of talking about austerity measures to repay debt, should be seeking stimuli for growth and regeneration.