In a recent post I that predicted we were on the verge of the next stage of the economic crisis, in which global political strife would erupt and bring down governments, lead to some national bankruptcies and cause trade protectionism. A commenter asked me to be more specific. I’ve found several examples that highlight what I was talking about exactly:
Riots, 20% unemployment, calls for new elections, and currency infighting is taking place in Europe.
Bans on certain Chinese goods are now in effect in India, with Singapore, Hong Kong and Thailand getting angry as well.
Major economies are seeing Depression sized rates of GDP decreases (e.g. Japan at 12%, South Korea at 22%!).
As time goes by it becomes more and more clear that despite some major lapses our financial regulation failures aren’t as bad as they were in Europe, our political and legal system is strong, and we are in a good position to weather the upcoming slowdown in global trade…if we use utilize our resources wisely. This is why I believe it is so important for our political establishment to start becoming forward looking, assume that GDP is going to contract 5-10% at least, and then plan for a period of slow growth. From all this mess we could actually emerge a much stronger country in 10-15 years, but it will require us to stop spending hundreds of billions trying to bailout bad loans.