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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (766)	5/6/2003 12:49:02 AM
From: LLCF	Respond to of 4912

< But I offer up that in today's reality there is nothing like the devastation of the entire economic engine, ie Western Europe destroyed by WWI. Years lost! Hundreds of thousands of lives lost.> I thought Europe's manufacturing output and employment dropped much less compared to the US in the 30's. Was it not a "US lead" depression through and through? Big boom, big bust, no? I agree that there are lots of things that wouldn't reoccur like the 30's, of course everything is different... but different isn't always good, our jobs are much more "linked" than ever before for instance... it is arguable that 'dominoes' is much more likely now IMO, and Greenspans as well: From recent congressonal testimony: "as a consequence, firms appear to be acting in far closer alignment with one another than in decades past.... the result is a potentially more synchoronized adjustment" And from my previous post... the 'service' economy which was so wonderful when the world was booming, seem to me to be much more at risk during downturns. The question begs, service what? IF those getting serviced are getting squeezed... Anyway. DAK

To: The Ox who wrote (766)	5/6/2003 1:19:52 AM
From: EL KABONG!!!	Read Replies (2) \| Respond to of 4912

Michael, With all due respect, I would disagree with the viewpoint that today's global economy is nothing like the global economy that preceded the great depression of the '30s. Let's start with Europe. The big manufacturing guns within Europe would include Germany, France and Great Britain. Today Germany is barely staving off creeping deflation. Given the magnitude of their economic problems, the current view amongst economists is that Germany is waging a losing war against deflation. France is contending with the price of socialism, and is discovering that their government can't be all things to all classes of people and still maintain competitiveness in the business world. Rancorous union demands, coupled with the demands of existing social programs are slowly bringing France to the precipice where the country cannot possibly pay for everything. Great Britain finds itself in a situation much like the USA, which would include a perceived bubble in real estate (much more so than in the USA, by the way) and collapsing financial markets. Taken collectively, the European equities markets could conceivably drop much farther than their USA counterparts given the extent of possible damage and the likelihood for any possible reversal of fortunes. Europe is unable to sustain itself on domestic consumption alone. The proof of that statement is found in simple mathematics. There is not enough demand within all of Europe (including the newest eastern European countries) to absorb the oversupply of manufacturing. In other words, too much supply, not enough demand and underutilization of existing manufacturing capabilities. Sooner or later, layoffs will be unavoidable. As workers are laid off, consumption will decline further. The main difference between the US economy and the European economies is that the USA is capable of survival on domestic demand alone. However, should layoffs and closures continue somewhat unabated, eventually (as in Europe) supply will exceed demand and loss of employment will result in further erosion of demand. One other noteworthy factor affecting the western economies is that European countries, by and large, have declining birth rates and very strict immigration standards, whereas the USA also has a declining birthrate, but closes the gap by having a rather liberal immigration policy. Population growth within the USA will remain about where it is now, while population is actually predicted to decline in European countries. A declining domestic population translates to a decrease in domestic consumer demands. We haven't even touched on geopolitical considerations, such as wars or stuff like that. We haven't examined climatic changes, which could also have negative impacts on domestic economies. So, the question as I see it is, are we currently in a global recession or a global depression? My answer would be 'no' to the latter (depression) but a tentative 'yes' to the former (recession). My belief is that (globally speaking) there exists too much manufacturing capacity, too little domestic demand (in particular from Asia and Europe), and insufficient (or incorrect) responses from existing governments and central banks to set the stage for an economic recovery in the near term. I think the pendulum is swinging in the direction of depression, and it may (or may not ever) get there. But I think that the possibility of a depression has advanced from a 'mere possibility' to the very edge of 'weak probability'. Just my opinion, though. As always, other posters may have equally valid opposing viewpoints... KJC