Recession talk

T

tourbillon_IHB

New member
I am back in LA for a short period time. Last year I had a discussion with IR about the economy and stock market. At that time, I said a big correction will happen in the beginning of this year, but everything should be fine by the second half. I think that is unlikely to happen now. At that time, I was anticipating a EU rate cut as well as a Chinese rate cut. EU is not cutting the rate, and China is actually increasing its rate. A huge hedge against inflation in the past is the cheap products from China. With rate increasing, RMB exchange rate going from 8.2 two years ago to about 7 right now, and likely 6 or 5.x by the end of this year, the inflation will be picking up soon. I think EU is no longer co-operating with US, but is preparing to use Euro to replace USD as the default currency. I think this downturn will last much longer than I previously thought. To be honest, I think US living standard will suffer dramatically, and it won't recover this time around. Like many people in Irvine, US borrowed too much to support a life style that is not sustainable.
 
As nice as it is to have the dollar be the default world currency, it has also allowed some REALLY stupid fiscal policy decisions by a government addicted to spending. If the Euro takes it's place, we won't have half the world buying our debt because they have nothing better to do with their dollars. While that may really suck in the short term, I think it will help us get back on the path to fiscal responsibility.
 
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