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Monday, August 8, 2011

The world runs out of options

We face recession without shock absorbers as Berlin loses patience

This time we face the risk of double-dip recession without shock absorbers. Interest rates are already at or near zero in much of the OECD club. Fiscal deficits are stretched to the limits of safety.

Far from loosening, the US is on track to tighten by 2pc of GDP next year, and Europe by 1pc to 2pc, into the slowdown.

China has already pushed credit to 200pc of GDP. It cannot repeat the trick.

The Anglo-Saxons can print more money, but the gains in asset prices for the rich are offset by losses from fuel and food inflation for the poor. This is a destructive trade-off.

The decision to throw everything we had at the crisis after Lehman-AIG was a legitimate gamble at the time, given the near certainty of depression if shock therapy had been tried – as in 1931.

The Telegraph


More:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8687496/The-world-runs-out-of-options.html
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