Growing Pains in Store for US, China and Southeast Asia

Excerpts from Dr. Enzio von Pfeil's recent appearance on Bloomberg Television Deutschland:

1. How do you read current market ebullience?
   • With great wariness
   • Based on our work, when credit recessions occur, markets have fallen by 40% over at least two years. The US market is only 13% off its high, and has another 31% to go from yesterday's closing, should this pattern prediction hold true.
   • Besides, when a recession does hit, banks and other financials are going to get whacked in at least two ways:
     • First, "R" means "Loss." So, the ability of debtors to repay their loans to the bank slumps.
     • Secondly, the whole house of cards created by bonus-starved bankers borders on being lascivious: their avaricious castles in the sky created by highly intertwined as well as leveraged derivatives are going to crash down, intensifying the recession.
   • I have maintained since 2006 that the US is headed for stagflation, further compounding the mess created by Mr. Greenspan just after 9/11.
2. What do you make of Prof. Bernanke's recent utterances regarding recession?
   • It seems like he is taking cues from Greenspan's "irrational exuberance" comments of December 6, 1996, during which Greenspan tried to rein-in market ebullience while giving a speech at the American Enterprise Institute's annual dinner. Prof. Bernanke wants to warn punters not to get carried away with going too long of the market.
   • He is preparing the public for a long, nasty haul. In other words, he is telling the world that The Economic Time™ in America is morphing from "bad" to "awful."
   • By saying the "R" word publicly, it seems as if the majority of the Fed governors now have come around to this view.
3. Is China in for a hard landing?
   • No – Beijing has a growth mandate. If it does not create 10 million new jobs a year, its leaders will be out of jobs.
   • But, there are clear growing pains. Indeed, the recent labor law is designed to distribute growth - and thus income - more evenly across China.
   • The other fly in the ointment is Tibet, "Nancy Pelosi's War" for any of you who have had the good fortune to see and read the fabulously gripping Charlie Wilson's War by George Crile. Tensions there are inducing tensions in the other "Tibets" of China, including the Muslim regions in the northwest. All ahead of the Olympics...
   • All of this adds to political unrest factors in North Asia...
4. Rice Price Unrest
   • Higher rice prices are causing further undulations in the rickety politics of Thailand.
   • This adds fuel to increasing political tensions in Southeast Asia.
   • So, locals want their government to stop exporting so much rice. After all, Thailand is the world's largest rice exporter.
   • This could affect our prices in Hong Kong quite strongly: we import 90% of our rice from Thailand. That dependency, coupled with the pervasive food distribution cartels in Hong Kong (there is one importer of pork, here, for instance: talk about a license to print money!).
   • The population at large is not happy with many aspects of the local government or our "representatives" here at all. There is an inverse relationship between rising pollution and falling English standards, for instance. All of which means that higher food prices, particularly of staples such as rice, can fan social tensions...
   • I was amused to read that our ever-diligent Secretary for Commerce and Economic Development, Frederick Ma Si-hang, heroically visited exactly two supermarket stores "...to calm consumer fears." Way to go, Fred!

Comments

[curious cat]

based on my work, whenever our government intervenes, previous corelationships are meaningless. we should have had a deep and terrible recession, maybe even a depression, but it will have to wait until we have a new president, so we can blame them. that's how america does it, my friend. the buck never stops anywhere.

[Thinkingahead]

I read it the latest Economist that 70% of Germans have an unfavorable view of the US - more than even the French (50%). I think this author is one of those Germans. I've read a number of his posts in the past and he is over-rated to put it kindly.

[sammyg123]

Enzio is from the US. He is also pretty early with his work. I would use what he writes in a strategic way, but make tactical decisions yourself. He is right, by the way.