A trader’s take on the coming crash:
I’m not an economist—far from it—but I keep reading and hearing that another financial crisis is inevitable.
In Europe, the finance ministers keep talking but do nothing while the situation deteriorates. The European Union’s central bank doesn’t have enough money to bail out the failing economies of its members. Italy, for example, with the third largest economy in the EU, is too big to fail and too big to bail. Yet Italian debt is so large — 120 percent debt-to-GDP ratio or a fifth more than its economic output — that some economists believe it can’t avoid default. The EU has the world’s largest economy, and if the eurozone fractures and the euro collapses, the impact on the global economy will be devastating.
China, with the world’s third largest economy, is also showing signs of strain. It still has large trade surpluses, but demand from troubled economies is decreasing, causing its manufacturing sector to slow down. The US, its largest customer, is placing fewer orders, reflecting the American worker’s reduced spending power. Inflation and a deflating real-estate market add to China’s problems.
In the U.S., the politicians don’t agree on the measures that could be taken to revive the economy. As a result, we draw ever closer to a deepening, double-dip recession. (When will we start hearing “depression”?)