Tags: sean | hyman | g20 | euro

Brace for Double Dip Until G-20 Finally Feels the Heat

By    |   Monday, 07 Jun 2010 01:20 PM

If you reside in any of the 20 largest nations of the world, your tax dollars for this trip just got wasted.

The G-20 (Group of 20 largest nations which account for 85 percent of the world’s growth) met in South Korea this weekend. All they did was “agree to disagree” on how to fix things in the world.

Since the meeting ended with no solutions and only confusion, the euro continued to get punished. The euro/U.S. dollar pair fell from just under 1.20 where it closed on Friday, down into the 1.18s. The euro/yen fell from just under the 110 mark on Friday to the 108s.

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You see, there’s a real problem when you get 20 different nations together. They have 20 different agendas until the fire gets hot enough. Evidently, the world isn’t falling apart fast enough for them just yet to get on the same page and to work as a team.

As you know, I’ve been saying for a while that it is going to get worse before it gets better.

Why?

It’s because I know politicians and how they mishandle their economies. But lately, I see that I’ve got economist Robert Reich on my side as well.

Reich says that the United States is going to go into a double-dip recession because the labor market continues to deteriorate.

He said that it takes about 100,000 new jobs being added each month in order to keep up with the population growth. So if there’s not at least that many jobs being created (and there’s not), then there are some major problems coming for the economy.

So this means that the “economic heat” will be turned up higher for the next G-20 summit in Toronto on June 26-27.

While they may have an incentive to do something at that point, I don’t think they will have what it takes to do anything more than put a Band-Aid on it.

Why?

Germany is already talking about increasing its VAT (value added tax) to 19 percent. They’re also talking about doing some serious budget cuts.

Well, that means less governmental spending and more taxation coming. That’s never good for economic growth. So that means there’s a huge chance of an economic slump all over Europe.

We also know that China is purposefully stepping on the brakes of its economy and it’s starting to work. The bad part about that is that it's coming at a bad time for the rest of the world. If you remember, it was China’s growth that helped to bring the global economy back from the brink of economic ruin last time.

In Japan, the country’s public debt is twice the size of their GDP. Their fifth prime minister in three years (who just took office) acts like he’s going to change all of that. If so, that means that there will be less spending going on in Japan.

So what you’re about to see is the anemic economic growth turn into another recession as budget cuts happen and less spending and higher taxation take effect.

It’s a “belt tightening” that’s taking place all over the world at the same time. Its not going to be pretty for the stock markets of the world.

It’s not going to be pretty for most commodities (except for gold) because there will be very little demand for most of them because of the lack of economic growth in the world.

However, it will be pretty for the yen and the greenback as money runs to the defensive side. So these two currencies, gold and Treasuries will benefit during the crisis time that is about to come.

Then, once growth does re-emerge and investors come out of their caves again, investors will go back to relying on fundamentals and the dollar and yen will lose their appeal.

However, in the meantime, get ready for more tough economic times to come.

I’ll be showing my Money Matrix Insider members how to maneuver through these waters so that their portfolios aren’t hurt like everyone else’s holdings.

In fact, MMI subscribers just made 176 percent on our last trade as the stock markets around the world dove.

It doesn’t take too many of those before you’re really taking the sting out of your stock portfolio and making huge headway while everyone else is crying the blues.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.


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If you reside in any of the 20 largest nations of the world, your tax dollars for this trip just got wasted. The G-20 (Group of 20 largest nations which account for 85 percent of the world s growth) met in South Korea this weekend. All they did was agree to disagree on...
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2010-20-07
Monday, 07 Jun 2010 01:20 PM
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