Thursday, December 30, 2010

Although Double Dip Recession is Expected and Numbers Justify it, I still don't believe in it.

Yesterday's Housing report sent shock wave in economists in US and there are more and more people saying about Double Dip Recession. Graph Below clearly shows direction towards south in Home Prices.

US Housing Price Graph in % Change.  Ref :

In India, Graph Below shows Interest Rates rising again towards "Previous Crash" level. So definitely it's another number supporting recession.

India Interest Rates Chart
In China, Interest Rates have started going towards North, and there are reports of Real Estate crash already.

China Interest Rate Chart.

With all these Data many are already concluding that we are entering in Phase 5, 6, 7 of economic cycle and Hence Recession !!! 

However I don't believe that Recession is underway because in western world despite Stimulus, Inflation level has not been out of hand. This will give a clear license to Central Banks to have another Rounds of Quantitative Easing / have more easing under current QEII or Simply Allow banks to lend freely. In emerging markets there may not be Stimulate. And they may raise interest rates in "baby steps", Carry Trade (i.e. borrowing money from places where interest rate is low, and investing in other country) will keep liquidity high.

In 2011 / 2012 time frame I think governments across world will be busy in stimulating economies further and convince people by steps like..

1) Raising Minimum wage.
2) Encouraging Employers for Higher wages to counter higher living prices.
3) Never increasing Interest rates aggressively enough to allow bubbles blast.
4) Ask people to compromise on "Prices vs Unemployment".
5) Redefine Comfort Level of Price Index .. e.g 2 is considered as OK in US they will say let's have 5 as OK. in India 5.5 is considered as "Comfortable Level" They may say Let's have 8 as Comfortable level.
6) Asking banks to resume lending activity more generously to help economy grow again.
7) Keep on telling people that as prices are increasing, so will your wages and everything will be normal.
8) Keep on telling people that it's temporary and everything will be fine soon. 
9) At some stage when inflation goes beyond control they will introduce "Price Control" i.e. to restrict food / essential commodities at government control prices.

Concluding central banks and Governments will Prevent Double Dip. Instead by resuming Lending, they can give very good results in short to mid term of course for Wall Street !! .

It will be however very interesting to see how countries like Germany / Singapore react to all this. There is a very good chance that they may opt for entirely different path towards austerity.


  1. If the recession continues, more people will lose their jobs and as a result, their homes will be foreclosed. As for me, I'd rather buy a house that's not too big. Just a simple house that's low cost and easy to maintain. We have to consider that payments should be low in order to keep our monthly credit at a minimum.

  2. Lots of thanks for this post.I think it is a very good post. It helps us many away. So many many thanks for this article.For more info visit here.

  3. I appreciate your work. I’ve been looking for quite some time such an useful resource and I’m very glad I found it...installment loans Texas

  4. Useful information.I am actual blessed to read this article.thanks for giving us this advantageous information.I acknowledge this post.

  5. It is an older article but it holds true about finance and cash loans.

  6. Check out Our Loan Forum for some loan information that you might find relevant.

  7. There are numerous reasons why it's imperative to check Social Security number data on your representatives, for example, to ensure that you are recruiting legitimate laborers, guaranteeing precise compensation reports, and guaranteeing that your workers' wages are appropriately credited to their SSA income records. A basic grammatical mistake could have sad long haul impacts on a representative. For instance, consider the possibility that a worker's SSN was entered erroneously. Imagine a scenario in which nobody saw this for quite a long time. A basic confirmation could stay away from this possibly terrible bungle.visit website