Saturday, June 5, 2010

A Complete U turn?

A Complete U turn?

A News

The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, also dropped proposals for a global banking levy, instead giving countries leeway to do what they thought best for their domestic circumstances.
The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability,” the communiqué stated.

WOW I can’t believe this. Are they serious? Will they take this bitter but essential pill?

If YES  - > Deflation -> Interest Rates UPà Double dip recession -> Economy survive as currency gains value.

If they act what they say, world enters in deflationary ear in time to come. “Gold will go down so will silver”. Real estate market will simply collapse. Interest Rates will go up so will value of Money. No matter how bitter this step sounds, this can save world from “Complete Collapse of Global Economy down the line if they really do what they say”.

It obviously means accepting clear double dip recession that will allow mal investments to purge. This can also cause depression. But in my opinion both these scenarios will be better than “Zimbabwe style collapse of economic system”.

If NO -> Inflation -> Interest Rate Low-> Hyperinflation -> Currency Crisisà Economy Collapse.

If they don’t act what they say, obviously we will have inflationary era and sky will be limit for gold, silver and in fact all commodities. What we need to be afraid is for the time being they will unwind the stimulus and as effect if S&P falls below 800 and Dow say below 7000. They will again have a meeting to support stimulus. All this will mean only Inflation in step manner as opposed to ramp manner.

Even if Yes / No
In both these situation war is one of the big time possibility as both these environments create frustrations for common man and to divert attention then typically politicians declare war.
Let’s hope I am stupid person and none of these 3 scenarios happen.


  1. So its a YES to deflation & we fight the next war with bows n dagger!
    Its like a beauty pageant going on, albeit in reverse - The Least Ugly wins!!
    Dollar isn't that ugly as they are trying to project vs euro and alike ;)

  2. Amaresh Ashok GangalJune 27, 2010 at 10:58 PM

    Thanks for your comment.. Dollar may be having lots of "faith value" but Dollar or infact any paper currency has no "intrinsic" value and hence with time, value loss is inevitable.

  3. Amaresh good one , keep blogging.