Tags: Bear | rally | end | Japanese | hyperinflation | emerges | Evans-Pritchard

Evans-Pritchard: Japan Inflation Will Kill Global Rally

Monday, 04 Jan 2010 04:09 PM

The great bear rally of 2009 is this year going to disappear and show investors that the economy is clearly the midst of a 21st Century Depression, akin to Japan's infamous “Lost Decade,” writes noted financial journalist Ambrose Evans-Pritchard.

Writing in the U.K.’s Daily Telegraph newspaper, Evans-Pritchard says the economic downturn today is worse than that which was faced by investors in the 1840s or 1930s, and not at all like the “normal cycles” of the post-War era.

“The surplus regions – China, Japan, Germania, Gulf — have not increased demand enough to compensate for belt-tightening in the deficit bloc, and fiscal adrenalin is already fading in Europe,” says Evans-Pritchard.

“The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.”

Evans-Pritchard says the West's fiscal blitz — which helped stop the crash last year — has simply shifted the debt burden onto sovereign shoulders, where it may do more harm in the end.

“Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare,” writes the columnist.

“Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting.”

Evans-Pritchard reckons that this is the year when Tokyo finds it can no longer borrow at 1 percent from a captive bond market, and when it must foot the bill for all those fiscal packages that “seemed such a good idea at the time. Once the dam breaks, debt service costs will tear the budget to pieces,” he adds.

Others agree that there are big problems with Japan’s economy, as the GDP there has declined to a level last seen in 1991, reports Business Week.

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The great bear rally of 2009 is this year going to disappear and show investors that the economy is clearly the midst of a 21st Century Depression, akin to Japan's infamous Lost Decade, writes noted financial journalist Ambrose Evans-Pritchard. Writing in the U.K. s...
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