Here is some crystal balling about the economy from Simon Dixon:
Banking reforms time has come and so has our time.
So here is how I think this is going to pan out:
1. The US credit rating downgrade is the first step towards a public opinion that people are not as willing to lend to government knowing that they will bailout banks during the next crash.
2. Quantitative easing will try to stimulate another false economy as we are seeing now, but as people take on more debt to stimulate the economy, they will remember that they can’t afford it again.
3. As the next round of regulations come into play and Banks need to have tighter reserves, banks will lay off their staff as they are now and use technology instead to cut costs to build reserves. So Basel III will essentially just create unemployment and make no difference on the stability of Banks.
4. As less people have jobs and more take on debt, we will have the credit card crisis next as people default on credit cards, sending the markets into turmoil again, followed by another housing crash, as people think housing is cheap right now and are leveraging up again.
5. Banks will stop lending to each other as they try to build reserves again and the government will freak out.
6. Governments will fail to raise money to bail out the banks as their credit ratings get downgraded further and banks will fold sending the economy into a depression by 2013.
7. Fed up with the depression we decide to stop the ponzi scheme and reform banking, opting for a system that will work as outlined on my blog .
Either that or we go for another round of quantitative easing and keep the ponzi scheme going for another cycle, followed by the steps above again.
Just depends how long we want to leverage the central banks balance sheet to determine when we will have real banking reform.
There is my crystal ball.
I am very hopeful of the future at the other end, but we will have a depression to get there.
Less jobs, more debts, defaults, housing crash, depression… these are really no good prospects. Do you see other scenarios for our future? Share your ideas in the comments below.