Friday, January 28, 2011

Warnings signals for global economy-----by Shan Saeed

Warning Signs are dangerous for 2011. Caveat is here to stay.

Do you witness all of the warning signs that are flashing all around you? These days it seems like there is more bad economic news in a single week than there used to be in an entire month. 2011 is already shaping up to be a very dark year for the world economy per se. We would have food crisis in 2011 and history would be repeated. The price of food is shooting through the roof and we have already seen violent food riots in countries like Egypt, Algeria and Tunisia. World financial markets are becoming increasingly chaotic/ unstable as the sovereign debt crisis continues to get worse in Europe, Japan, UK and USA. Meanwhile, the number of Americans applying for unemployment benefits is up, foreclosures are up and poverty continues to spread like a plague throughout the United States. What we are starting to see around the globe is a lot like the "stagflation" of the 1970s. High inflation and high unemployment. All of the crazy money printing [ Quantitative easing or Monetary accommodation] that has been going on is overheating prices for agricultural commodities and precious metals [ Gold/ Silver], but all of this new money is not doing much to help the average man or woman on the street. QE wont fix the economy. Infact, it would create asset market inflation in the emerging economies.

Do you remember what the economy was like in America during the 70s? Richard Nixon was heading the government. It had high unemployment and high inflation at the same time. It was horrible. Well, all the warning signs are there for a stagflation repeat. Unemployment is at epidemic levels over 10% and it isn't showing any signs of decreasing much any time soon. Meanwhile, the crazy money printing that the Federal Reserve and other central banks have been doing is starting to cause significant inflation. The price of oil is about to cross the $117 per barrel mark and the UN is forecasting that the global price of food is going to increase by 37 percent by the end of the year.

So, yes, there are some really, really good reasons to be incredibly concerned about the global economy in 2011. This year would be much more dangerous than 2010.

Meanwhile, the only solutions that global leaders seem to be offering are more money printing, more government debt and more financial control by international organizations. are these solutions viable? I doubt.

The truth is that we have a real mess on our hands. The following are 20 economic warning signs that should be of great concern to the global decision makers ....

#1 Over the past seven days, the price of wheat has risen by 17 percent as concerns about food shortages continue to grow around the world.

#2 The price of corn is up a staggering 97 percent since June-2010.

#3 The United Nations is projecting that the global price of food will increase by 37 percent in 2011.

#4 According to the U.S. Department of Labor, the number of Americans applying for unemployment benefits rose last week to the highest level since last October.

#5 According to the Pew Charitable Trusts, of the 15 million Americans "officially" unemployed in December, 30% of them had been unemployed for one year or longer. According to Nobel Laureates Paul Krugman at Princeton University and Joseph Stiglitz at Columbia University, these are turbulent signs for the economy.

#6 Beginning in the month of March-2011, the U.S. Postal Service will begin shutting down up to 2,000 post offices across the United States.

#7 In an absolutely stunning move, Standard & Poor's has downgraded Japanese government debt from AA to AA-. Please read Bloomberg News

#8 73 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009.

#9 Approximately 5 million homeowners in the United States are at least two months behind on their mortgages, and it is being projected that over a million American families will be booted out of their homes this year alone.

#10 According to the Congressional Budget Office, the Social Security system will run a deficit of 45 billion dollars this year. When the new payroll tax breaks are factored in, the projected "Social Security deficit" for this year swells to 133 billion dollars.

#11 The U.S. money supply has been rising at a pace that is absolutely unprecedented.

#12 Right now, money is flowing out of bonds at an absolutely staggering pace. Bond market is risky and is in a default like situation.

#13 The U.S. Bureau of Labor Statistics says that the price of food increased 50 percent faster than the overall rate of inflation during 2010.

#14 According to the U.S. Conference of Mayors, visits to soup kitchens are up 24 percent over the past year.

#15 During the last school year, almost half of all school children in the state of Illinois came from families that were considered to be "low-income". I have studied from University of Chicago and spent my time there.

#16 Those living in the town of Discovery Bay, California will soon not be permitted to use cash to pay for any public services. Could this be another disturbing step in the direction of a cashless society? 41 States in USA are acting like Greece and Ireland.

#17 French President Nicolas Sarkozy says that the IMF should be given the power to enforce new rules that would be designed to prevent "global economic imbalances" from happening. Monetary dumping should be stopped by the USA i.e. Quantitative Easing or Monetary Accommodation.

#18 The U.S. government is currently borrowing about 40 cents of every single dollar that it spends.

#19 According to the Congressional Budget Office, the U.S. government will have the biggest budget deficit ever recorded (approximately 1.5 trillion dollars) in 2011.

#20 It is being projected that the U.S. national debt will increase by $150,000 per U.S. household between 2009 and 2021. Household debt to GDP ratio is 122%.

So is there any good news?

Well, yes there is.

U.S. Representative Ron Paul has introduced a new bill to audit the Federal Reserve. Let's hope that the move to audit the Fed fares better in the 112th Congress than it did in the 111th Congress. It would be wonderful if the American people could actually learn what has been going on inside the Fed all this time.

But mostly the news about the global economy is really bad. There have been some people that have been warning for decades that all of this money printing and all of this government debt would eventually catch up with us. Now it has almost reached the moment of reckoning that the doomsayers have been warning about for so long, and it is going to be really painful to go through it.

Thanks to the greatest debt bubble in the history of the world, living beyond the means for decades in USA. When "times were good" it was not because either the Republicans or the Democrats were doing something right. The truth is that both political parties have been horribly addicted to government debt[ $14 TRILLION right now]. The debt-fueled prosperity that USA politicians purchased is starting to come to an end, and an economic implosion is coming that most Americans will never see coming. But hopefully most of the readers of this article are much wiser than the average American. Warning signs are there. Now is the time to take action and get prepared.

Disclaimer: This is just a research report and not an investment advice. Investors are encouraged to execute their own due diligence before making any strategic investment or decisions.

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