The economists are divided over the question as to whether the governments of developed world indulge in more spending to prevent a second recession or become frugal to keep down the debts that are ballooning so as to bring back confidence among the investors.
Albert Edwards of Societe Generale, a French bank said the debate has just eaten up valuable time. He predicts a “bloody deep recession” that will cause the falling of the stock markets a minimum by 60%. This will be followed by many years of inflation at 20% or 30% because of continued printing of money by all the central banks; prices will consequently soar. Edwards is known as a perma-bear – one of a small group that has always flourished outside the financial industry but was never inside the banks included in the mainstream.
The catastrophic crisis of 2008 continues to be fresh in the memory of the people causing Nouriel Roubini and other pessimists like him to become icons. Edwards has always been predicting from 1997 that USA would be overtaken by a Japanese type of slump. He is now being treated with a new sort of respect.
In financial circles it has now become the vogue to listen to bears especially at this point of time when doubts of sustainability are being raised in the euro region. There are fears of another recession in the USA. China’s growth might catch up. But there are others who think that the pendulum having swung too far would now inevitably swing back.
A hedge fund manager in Geneva, Phillipe Jabre said, “Nothing is ridiculous anymore. There is no doubt that these days extremely negative research is being tolerated more. These guys are reinforcing a conviction among many who invest in hedge funds that they should remain scared”.
The newly discovered popularity of Edwards goes a long way to point to the trend of this thinking gaining favour. Previously clients used to show him the door but recently as many as 600 investors were drawn to him during a London conference.
In similar vein is another strategist of London, Bob Janjuah, whose predictions seem to be gloomier than those of Edwards said, “Even I get depressed his stuff”. Last summer he too got the attention of nearly six investment banks. Janjuah explained, “Clients are more receptive to hearing polar ends of an investment view”. He does not expect the economies of the topmost developed countries to be more than 1% on an average during the forthcoming five years.
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