The latest price of light crude oil fell to $79.98 today (...), foretelling a worsening of the world economy right ahead. We have definitely left the eye of the hurricane and are now fast approaching the heavy gusts.
In spite of the trillions of dollars injected in western economies by central banks to jumpstart the growth engine, money supply continues to contract in those same economies. In other words, contrary to the general expectations of monetary and fiscal policy decision makers, the trillions of dollars are not generating growth. Worse, those trillions million of dollars have increased debt in those western economies to unbearable levels.
The world economy is thus in a much more dire situation than during the financial crisis of 2008-2009. More debt and yet no growth! People will make a bonfire of Keynes and all temples of Keynesianism by the time this crisis is over!
We have every reason – theoretical and practical – to hold the view that so long as the massive quantitative easing fails to trigger growth, the beast of inflation will remain dormant. We form part of that tiny minority of observers who believe that it is not inflation but deflation that is lying right ahead. In such a scenario, asset prices cannot but depreciate faster than money creation. Debt and Deflation rhyme with Depression... the 3D’s most feared by central banks and bankers.
This double dip of the world’s economy, which the economic commission of the MMM forecasted in early 2010, is materialising. We have been unfortunately right on all counts since 2005 – we say unfortunately because rather than taking our reasoned and well-thought out proposals seriously, government, all the way through, taxed us with silly remarks dismissing us as “prophètes de malheur”. Measures which could have spared the country a lot of suffering have been disdainfully rejected.
Instead, the government has been kicking the proverbial can down the road. The whole population and especially the most vulnerable section of our society, will finally bear the brunt of this gross mismanagement of our economy.
Most economists worldwide lacked the foresight to see the coming financial crisis in 2007. They are the same bunch of economists who did not expect the double dip presently crystalizing in the major world economies. We still do maintain that the deep recession the world economy is in, is not a textbook case.
This could be a reason why so many economists are in disarray.
We are dealing with a crisis of monumental proportion that seriously challenges the very survival of a western paradigm – a paradigm that has flourished on slavery, colonisation, the abuse of life, the abuse of mother earth and a total disregard for the environment.
A paradigm twisted in favour of the exclusive 1% on the back of the 99% of the world population. This game of utter greed and total control has run its course.
This crisis will eventually and hopefully give birth to a new world – more equitable, more humane, more respectful of life, more respectful of the environment and of planet earth.
In the short and medium term however, we need to prepare for the worst and hope for the best. This is not doomsday mongering – this is what government is all about. “Gouverner, c’est prévoir.”
It’s darkest before dawn and we know dawn will ultimately come. This is where lies our deep faith and optimism – surviving the coming tsunami to co-create the new Mauritius later.