Tags: david | skarica | Bubble | Wounds

No Magic Band-Aid: Bubble Wounds Take Time to Heal

By David Skarica   |   Monday, 19 Jul 2010 08:38 AM

Market pundits are funny because they tend to look at every little piece of economic news.

Right now, it seems like everyone is worried about a double-dip recession after the recent slowdown in the economy and housing numbers.

However, what very few pundits take into account is that we are in a postbubble economic world. Households are rebuilding their balance sheets. Financial markets are recovering from a massive deleveraging and loss of confidence.

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These aren’t things that can be resolved in three months, or even three years, for that matter. Most bubbles are followed by trading ranges that can last five, 15 or even 20 years.

Therefore, rather than a double dip, what we will probably experience is the economy slipping in and out of recession for the next 10 years as it repairs itself.

This has been the case in every other postbubble economy, which include the United States in the 1930s and Japan in the 1990s and 2000s.

Because the excesses were largest in the United States, I am more negative on America than other economies, including Europe, in the longer term.

My view is that you shouldn’t look for quick fixes.

Government stimulus efforts and spending won’t save the economy.

Rather, it is a long process of the economy cleansing itself as consumers deleverage.

If you want to look for growth in the next 10 years, I would look outside Western economies.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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