Now, there are bullish voices telling us that things are headed back to normal. Mainstream forecasts for GDP growth this year (2010) are quite robust, north of 4 percent for the year, based on evidence from past recoveries. However, the underlying fundamentals of a banking crisis are far different from those of a typical business-cycle recession,

Philip G. Zimbardo, Professor Emeritus of Psychology at Stanford University, has studied how we as humans perceive time.1 It seems that humans live in six psychological time zones: two in the past, two in the present, and two in the future. He divides the past into positive (those who are nostalgic, but also the keepers of family records, etc.) and

it would be better to have that inevitable recession as far into the future as possible, and preferably with a little inflationary cushion and some room for active policy responses. A recession in 2011 or 2012 would be problematic, if not catastrophic. Rates are as low as they can go. Higher deficit spending, as a way to address recession, is not

Every hyperinflation looked the same. “Hyperinflations are always caused by public budget deficits which are largely financed by money creation.” But even more interestingly, Bernholz identified the level at which hyperinflations can start. He concluded that “the figures demonstrate clearly that deficits amounting to 40 percent or more of

If you believe in deflation, U.S. Treasuries offer great value. Unsurprisingly, the biggest proponents of deflation are David Rosenberg and Lacy Hunt. Both work at firms that manage a lot of money in bond funds.

Equity volatility follows the credit cycle. If you push commercial and industrial (C&I) loans forward two years, it predicts increases in the Market Volatility Index (VIX) almost down to the month. We should expect heightened episodes of volatility for the next two years at a minimum.

The title for the chapter on Japan is “A Bug in Search of a Windshield.” While the currency of the Land of the Rising Sun is very strong as we write, there are real structural reasons, as well as political ones, that lead us to predict that the yen will begin to weaken. At first, it will be gradual. But without real reform in government

The author of this report highlights that most of the obligations countries now have is to their pensioners and senior citizens. Naturally, governments could cut Social Security or Medicare and reduce the future liability. There is no way that would fly politically. The complication is that as countries grow older, most of the voters also happen to

As we will see, whether you call it the Great Recession or the Great Financial Crisis, what we are in is not a typical business cycle recession. It is a balance sheet recession. It is the end of the debt supercycle that started more than 60 years ago. The recovery time in much of the developed world is going to be measured not in months but in