Prakash Kumar

Any slowdown in US gets invaribly compared with the Great depression. One recession of 2009-2009 came very close to get noticed in the same league of Great depression. Bush promissed stars while Obama delivered the stars in terms of bailout packages. While Lehman Brothers and few others collapsed, sucor was provided from tax payers money to support Motor city (Chrysler and GM) and Big Apple (The finance cos incl. CITI). A crippled economy in the dollar zone showed a distinct sign of revival at the dawn of 2010 which resulted in immediate gaga over the success of bailout package.

Questons galore – Is a 1 year recession big enough to be compared with the great depression? Was the situation so bad that $1 trillion would just be required to stem it in the US? Why such a recession was cyclical across the globe as all economies (developed and emerging) had to resort to some sort of support. Still the unemployment numbers and growth numbers remain bad. However, the biggest question to be asked is why on heavens was Inflation so high across the global economy.

Inflation alone is the biggest devil. It is the responsibility of elected or dictator government to feed its citizen and there cannot be any political division to this ground rule. Still emerging economies like India are finding it hard to feed its population while commodity prices and oil prices have remained out of bounds. Recession on one side and high (inflation, oil price and commodity price) on other side just do not make sense. That too when the recession pronounced was labled a big one.

Fail to differ by the general wisdom. I believe that the policy of various government and the penchant towards the housing bubble was the cause of the fall and there was no recessionary pressure as such. Companies which went broke during this time were the ones which were paining for some time now and they used the timing to join the que of accepting bailout packages. Lehman and co had too much invested in riskier housing assets which failed under the subprime issue. Elsewhere there was too much spending by various governments on mindless programs which ate up all what is in federal coufers.

Stock market sell off these days is symbolic of nothing – we are living an era of 5% cut today and 5% bounce tommorrow. Fundamentally +/- 5%  gyration does not make sense but it has more to do with liquidity and too much of it chases riskier high beta stuff for fast cash. There is no theory of long term investment anymore and 1 month appears a long enough time.

Eurozone however appears to be a league of its own. The threats posed by Greece, Portugal and now Spain is far more fearful then what we saw in 2009. These are big sovereign which is in trouble. America is bairly limping and it has no more funds available for more bailout esp. after government parlays in the Insurance sector. Commodity prices and oil prices have both cooled down considerably. Well this is genuine signs of a recession coming now.

Unfortunately there is no signs of any action taken at ground to fight the embryo. Many talks of double depression will soon emerge but federal governments globally are too rigid to change the way they work.