Andy Xie is an independent economist, former Morgan Stanley chief economist now living in China. The following is from the South China Morning Post:
The US will enter this second dip in the first quarter of next year. Its economic recovery in the second half of this year is being driven by inventory restocking and fiscal stimulus.
However, US households have lost their love for borrow-and-spend for good. American household demand won’t pick up when the temporary growth factors run out of steam.
By the middle of the second quarter next year, most of the world will have entered the second dip. But, by then, financial markets will have collapsed.
When the market sees the second dip looming, panic will be more intense and thorough.
By next spring, another stimulus story, involving even bigger sums, will surface.
After a month or two, people will be at it again. Such market movements are bear-market bounces. Every bounce will peak lower than the previous one. The reason that such bear-market bounces repeat is the US Federal Reserve’s low interest rate.
A stock market bubble is a negative-sum game. It leads to distortion in resource allocation and, hence, net losses. The redistribution of the remainder, moreover, isn’t entirely random.
The truly random part for the redistribution among speculators is probably 50 cents on the dollar. The odds are quite similar to that from playing the lottery. Every stock market cycle makes Chinese people poorer. The system takes advantage of their opportunism and credulity to collect money for the government and to enrich the few.
http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cba0a0a0/?vgnextoid=e625067403743210VgnVCM100000360a0a0aRCRD&vgnextfmt=teaser&ss=China&s=News
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