主题：【讨论】“六个月之后不会再有投行存在了”。 -- 厚积薄发

This will be a long, ugly and nasty U-shaped recession lasting at least 12 months and more likely 18 months, not the mild 6 month V-shaped recession that the delusional consensus expects. While an L-shaped decade long economic stagnation is unlikely the recovery of the economy from this recession will be weak as the financial crisis and serious macro imbalances will lead to sub-par (below trend) economic growth for years to come.

The US recession has already started in Q1 of 2008 based on the five indicators tracked by the NBER. The Q2 rebound is only driven by the temporary tax rebates and GDP growth will slip into negative territory from Q3 2008 until at least Q2 of 2009.

Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus, equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of US and global stock markets.

The rest of the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time. Already 12 major economies are on the way to a recessionary hard landing. Indeed all of the G7 economies are now entering a recession. While the rest of the world will experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks.

The current U.S recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain, Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies.

But over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 30% will further reduce inflationary pressure.

The Fed will have to cut the Fed Funds rate much more as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial crisis and severe recession cycle.

The Bretton Woods 2 regime of fixed exchange rates to the US dollar and/or heavily managed exchange will unravel – as the first Bretton Woods regimes did in the early 1970s – as US twin deficits, recession, financial crisis and rising commodity and goods inflation in emerging market economies will destroy the basis for its existence.

Thus, the scenario of 12 steps to a financial disaster that I outlined in my February 2008 paper is unfolding as predicted. If anything financial conditions are now much worse than they were at the previous peak of this financial crisis, i.e. in mid-march of 2008.

This financial crisis signals the beginning of the decline of the American Empire; over time the relative economic, financial, military, geostrategic power of the US and reserve role of the US dollar will significantly decline.

This crisis also represents a Crisis of the Suburbian (“McMansions and Gas-Guzzling SUVs”) American Way of Life. The sharp rise in gasoline and energy prices and transportation costs, together with the sharp fall in home prices, will radically change the pattern of living of the typical American household.

Some of my views are fleshed out in more detail in my recent interview on Barron’s and in the profile article about me recently published by the New York Times magazine.

Since I wrote those words in August financial and economic conditions are severely deteriorated; we are now closer to the financial meltdown that I described in my February paper in my “12 Steps to a Financial Disaster” . Stock prices are sharply down and there is a risk of a market crack; interbank spreads and credit spreads are wider than ever since the beginning of this crisis; Lehman and Merrill are gone and soon enough Morgan Stanley and Goldman Sachs will also need to find a larger partner with deep pocket or risk getting in severe trouble; the biggest insurer in the world – AIG – is teetering near bankruptcy; the biggest US S&L – WaMu – is effectively insolvent and close to going bust; dozens of other banks are near bankruptcy; there is a beginning of a silent bank run as depositors are nervous about their assets; the panic is mounting in financial market; the CDS market is frozen because of the collapse of Lehman and the soon collapse of AIG, WaMu and other financial institutions; many hedge funds are now teetering as their losses are mounting; investors in fixed income – including preferred stocks – have experienced massive losses; overnight LIBOR spiked over 300bps to over 6% as panicky investors seek the safety of cash while the Fed lost control of the Fed Funds rate yesterday as the liquidity demand push such rate from the target of 2% to over 6%; the financial turmoil is becoming global with stock markets all over the world plunging.

Worst of all policy authorities are now running out of bullet and going towards desperate measures that will end up being counterproductive.

• 房地产跌30%，股市跌40%，