“Darkest Days” for the Economy: Behind Us, or Just Ahead?
Economic skies forecast: slowly clearing, heavy rain returning, or cyclone?
November 18, 2011
By Elliott Wave International
Many people still talk about a “recovery,” or at worst
only see a possible double-dip recession. But what if
the mistake was to think the economy was only in a recession in
the first place? It can’t “double-dip” when it never
truly recovered:
“The respite following the 2009 stock market
low is not a new expansion. It has failed to improve housing sales,
barely caused employment to budge, and hasn’t managed — despite
the unprecedented manufacture of new Fed money — to get the total
supply of credit back above its 2008 high.”
Elliott Wave Theorist, Sept. 2011
Indeed, the Federal Reserve’s quantitative easing measures have
failed.
The Fed’s latest policy plan to stimulate the economy has been
dubbed “Operation Twist.”
“On September 30, the Fed started operation
twist, by which it will sell its holdings of short-term Treasuries
and use the proceeds to buy longer-dated T-bonds. The goal is
to foster more credit by lowering long-term borrowing costs. But
last month [we] noted that low rates compound the money-making
problem for banks by reducing margins. ‘Historical verification
of this development is obvious from Japan,’ says a recent report
from Hoisington Investment Management. ‘Normal bank lending functions
are essentially shut down. This risk now confronts the U.S.’ The
problem is not the cost of credit; it’s demand, which is waning.
Lower rates will have little effect in helping foster enough expansion
to allow the mountain of total credit-market debt built up over
the last 70 years to be repaid, or even serviced.”
Elliott Wave Financial Forecast, November
2011
Imagine if the newspapers reported that Bernanke appeared before
Congress and said this:
“‘This is the most serious financial crisis
we’ve seen, at least since the 1930s, if not ever.’”
Bernanke did not say that, but his counterpart in Britain
did. As reported by The Telegraph (Oct. 6),
the comment came from Sir Mervyn King, the Governor of the Bank
of England.
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This
article was syndicated by Elliott Wave International and
was originally published under the headline “Darkest Days” for the Economy: Behind Us, or Just Ahead?.
EWI is the world’s largest market forecasting firm. Its staff
of full-time analysts led by Chartered Market Technician
Robert Prechter provides 24-hour-a-day market analysis to
institutional and private investors around the world.