2013 U.S. Economic Forecast: Even Without the Fiscal Cliff, A Recession Still Looms
Everyone is worried about the damage the “fiscal cliff” might do to the U.S. economy in 2013, but the reality is that’s only one of the potential problems in our 2013 U.S. Economic Forecast.
At present there appears to be four problems– aside from the fiscal cliff– that could throw the U.S. economy into recession in 2013.
These are international problems that include:
Brewing trouble in Japan: Japan faces an election next month. More importantly, its government debt is currently 230% of GDP, with that ratio rising by about 10% a year. The current government has increased sales tax in 2014, which may cause a recession and will likely push its debt to GDP ratio even higher.
More Woe in Europe: The Eurozone mess continues and is getting worse rather than better. Investors are just beginning to wake up to the fact that France, by exceptionally foolish policies of fleecing the rich, has put itself in a position that may well prove worse than those of Italy or Spain.
Troubles in the BRICs: All four of the BRICs are reaching the end of the road in terms of economic growth. Having had the world’s money thrown at them like confetti, they have used it to grow government and reward themselves through an orgy of corruption.
China‘s problems are hidden in its banks’ balance sheets. India needs a government that does not overspend (fat chance!), as does Brazil. As for Russia, its military will soak up all its gigantic oil revenues and its leaders will embezzle any money the Western banking system is foolish enough to lend it.
Iran, Israel, and the Middle East: Either Iran will get a nuclear weapon in 2013 or Israel will go to war to stop it. Either way, it’s bad for the world economy; the only question is how bad.
CHART: Just How Bad Is The Drop From The Fiscal Cliff?
Kyle Bass, Larry Edelson, Jim Rogers and Marc Faber Predict Widespread War
Kyle Bass writes:
Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.
Larry Edelson wrote an email to subscribers entitled “What the “Cycles of War” are saying for 2013?, which states:
Since the 1980s, I’ve been studying the so-called “cycles of war” — the natural rhythms that predispose societies to descend into chaos, into hatred, into civil and even international war.
I’m certainly not the first person to examine these very distinctive patterns in history. There have been many before me, notably, Raymond Wheeler, who published the most authoritative chronicle of war ever, covering a period of 2,600 years of data.
However, there are very few people who are willing to even discuss the issue right now. And based on what I’m seeing, the implications could be absolutely huge in 2013.
Former Goldman Sachs technical analyst Charles Nenner – who has made some big accurate calls, and counts major hedge funds, banks, brokerage houses, and high net worth individuals as clients – says there will be “a major war starting at the end of 2012 to 2013”, which will drive the Dow to 5,000.
Why are these economic gurus forecasting war?
For one thing, many influential people wrongly believe that war is good for the economy.
In addition, Jim Rogers says:
If it turns into a trade war, it is the most momentous thing of 2011,” said Rogers. “Trade wars always lead to wars. Nobody wins trade wars, except general who end up fighting the physical wars when they happen. This is very dangerous.
Rogers also explains:
A continuation of bailouts in Europe could ultimately spark another world war, says international investor Jim Rogers.
“Add debt, the situation gets worse, and eventually it just collapses. Then everybody is looking for scapegoats. Politicians blame foreigners, and we’re in World War II or World War whatever.”
And Marc Faber says that the American government will start new wars in response to the economic crisis:
- “The next thing the government will do to distract the attention of the people on bad economic conditions is they’ll start a war somewhere.”
ART CASHIN: We Are On The Verge Of A Major Currency War
“What troubles me in that area is the call for elections in Japan, and the fact that Mr. Abe, who had been Prime Minister, may come back. He has called for unlimited monetary easing from the Bank of Japan and the Ministry of Finance.
It sounds to me like we are on the verge of a major currency war, under the guise of monetary policy. He specifically said, ‘I want to see the rate of inflation go above 3%.’ Now I’m sure they are bright enough not to get into something like Germany in the Weimar Republic. But we’ve got central banks all around the world beginning to play with fire.”
Peter Schiff: The Real Fiscal Cliff Is Dollar Crisis! Buy Gold! Buy Silver! Own Real Things!!!
While The Fed Is Playing An Extraordinarily Dangerous Game, The World Should Consider Switching From The Dollar To Gold
A “renminbi bloc” has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan — a major signal of China’s successful bid tointernationalize its currency, a research report has said.
The Peterson Institute for International Economics, or PIIE, said in its latest research that Chinahas moved closer to its long-term goal for the renminbi to become a global reserve currency.
Since the global financial crisis, the report said, more and more nations, especially emergingeconomies, see the yuan as the main reference currency when setting their exchange rate.
And now seven out of 10 economies in the region — including South Korea, Indonesia,Malaysia, Singapore and Thailand — track the renminbi more closely than they do the USdollar. Only three economies in the group — Hong Kong, Vietnam, and Mongolia — still havecurrencies following the dollar more closely than the renminbi, said the report, posted on theinstitute’s website.
S&P 500 Futures Pit on May 6, 2010. Start watching at the 2-minute mark.