Ambrose Evans-Pritchard...A 2009 Financial prediction

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Original date-this webpage..30 Jan 2009
Original date-Ambrose article..6 Jan 2009

Ambrose Evans-Pritchard is an erstwhile Washington pressman for the London Daily Telegraph. Celebrated for starring in the debunking of Bill Clinton's participation in the "Whitewater Affair"

In the Evan-Pritchard article below you will read a short paragraph regarding Russia and $40 barrel oil which will says Ambrose result in riots in the streets of Russia.
As you already know there were "PROTESTS in the streets just a couple of days ago and guess what...The price of oil....thats right,was $40
Do you think that THEY have put Master Ambrose in charge of the next "Orange Revolution"..More importantly who THIS TIME is topping up his bank account.

"The Orange Revolution (Ukrainian: Помаранчева революція, Pomarancheva revolyutsiya) was a series of protests and political events that took place in Ukraine from late November 2004 to January 2005, in the immediate aftermath of the run-off vote of the 2004 Ukrainian presidential election which was marred by massive corruption, voter intimidation and direct electoral fraud. Kiev, the Ukrainian capital, was the focal point of the movement with thousands of protesters demonstrating daily. Nationwide, the democratic revolution was highlighted by a series of acts of civil disobedience, sit-ins, and general strikes organized by the opposition movement.
The protests were prompted by reports from several domestic and foreign election monitors"...Wiki (my emphasis)


06 Jan 2009


Let us monitor this prognosticative rambling of one highly paid talking head(when out of the sand)...and relate the final outcome on 31 December 2009 against that of the people who have taken a time out in their working week to comment(see below) on the possible accuracy of Evans-Pritchard's predictive capablenesses

Ambrose Evan-Pritchard's article is Here....or read immediately below

US will emerge as undisputed top dog in 2009
Interest rates near zero across the G10 bloc will prevent a replay of the Great Depression, but they will not pull us quickly out of the doldrums, writes Ambrose Evans-Pritchard.

Last Updated: 7:02AM GMT 05 Jan 2009

Central banks will do whatever it takes to combat debt deflation. Even Frankfurt will join the rush to print money, buying every form of debt from mortgages to corporate bonds.

The Fed will follow the Bank of Japan in propping up stock markets. Puritans will grumble, but the surprise will be how it long takes for this stimulus to gain traction. We will learn the term "pushing on a string".

Western societies will feel the first shivers of raw fear as people twig that the authorities are not in control. Iceland's winter will set an awful example. Job losses will reach 1m a month in the US at the point of peak pain. Economists know this is a late-cycle effect – darkest before dawn – but the public will see it otherwise. This will be the phase that shakes society.

The geopolitical landscape will look different. Cohesive states with a rule of law and old democracies – the Anglosphere, Holland, France, Scandies – will muddle through. They will start to enjoy a political premium in investor psychology, despite horrendous debts.

Obama's America will shine. The country will reemerge as undisputed top dog, the only one with real demographic, scientific, and strategic depth. As first into the crisis, it will be the first to hit bottom. Those expecting the dollar to collapse will have to wait.

The damage to core Europe will take longer, but run deeper. Belgium will face a break-up scare. Markets will test highdebt states as they try to roll over bonds – €200bn (£191bn) for Italy and €40bn for Greece. Spain's corporate debts will turn bad.

Germany's economy will contract by 3pc as exports collapse, and the delayed effects of the strong euro and tight money feed through. Angela Merkel's (pictured below) Left-Right coalition will be haunted by its failure to tackle the crisis earlier. The neo-Marxist Linke party and the hard-Right will muscle in. The country will start to look ungovernable. This will at least divert attention from the Club Med mess, making a North-South split in the eurozone less likely. After sterling's sudden death, the euro will face slow death. The pair will refind their accustomed level.

Authoritarian regimes will fare badly. Those that depend on perma-boom to hold power will fray. Repression will escalate in China as an inflammatory cocktail of migrant workers and jobless graduates vent their anger in riots. Massive fiscal spending will buy time.

The Kremlin will not have that option. Oil at $40 (£28) a barrel will expose the insolvency of the Russian state, forcing spending cuts. Anti-Kremlin marches will evolve into a simmering rebellion, setting off pitched battles with police.

Analysts will be shocked by the ferocity of the downturn across Asia, where the strategy of export-led growth will be called into question. It will become clearer that Asia's boom has been a leveraged play on the West, and leverage works both ways. Some Pacific tigers will try to resist the denouement by holding down currencies. Such beggar-thy-neighbour policies will lead to tit for tat responses. The US and Europe will tire of holding the ring for free trade. The WTO will look ever more like the League of Nations.

By late 2009, the massive monetary and fiscal stimulus will feed through. Angst will start to switch from deflation back to the risk of incipient inflation. Equities, oil, and gold will rally. Bonds will falter, and then crash.

At that point it will become clear that reflation is just as dangerous as deflation in a world of debt. We will find that there is no way out. But that, perhaps, can wait until 2010.



Comments: 31

There are some very old and powerful rules of economics it would be wise to consider.

The first is the principles of Mercantilism, that those nations with the most specie rule, because they can afford the largest armies and navies. This principal still applies, though no longer narrowly defined by specie, but a whole array of other commodities, services and trade itself. While the emphasis was put on specie, the importance of mercantilism remains with military might. Because in the absence of such might, economic stability is in peril.

In this, the US remains the unparalleled leader.

The second rule is "The iron rule of currency", that "bad money pushes out good". That is, spend the bad money, and save the good money. Oddly enough, this time it may apply not to different currencies, but to different forms of the same currency.

That is, some forms of USD may be worth much more than other forms of USD. The dollar may be split between forms that are deflating and other forms that are inflating, or hyperinflating.

This is already starting to be seen within the US itself, with "real" or "retail" money deflating, while "imaginary" or "leverage" money is inflating. Once this effect becomes internationalized, it could also become exaggerated.

For example, right now, at 100% production, the US can only print enough paper currency to back 5% of its daily retail. As such, its paper money and coins are worth 95% more than face value. And this cannot quickly be changed.

Yet at the same time, the US government is dramatically monetizing its debt, "creating" vast amounts of money with the intent of forcing inflation.

At a given point, this will force a "paper run" on USD, an cause it to skyrocket internationally as every effort is made to physically return it to the US, while at the same time the "virtual" USD continue to inflate into worthlessness.

When the US T-bill bubble bursts, there will be economic fireworks like the world has never seen.
Jonathan A. Negron
on January 07, 2009
at 02:08 PM

I think you're probably spot on - US should 'recover' first and exporter countries will suffer the biggest job losses. It's a race to the bottom for all the world's currencies and I reckon proper stagflation will be the result (clever fiat currency pedlars don't do deflation!). The Chinese, Japanese, Saudis et al. probably haven't got the balls to dump the dollar, especially if things kick off in the Middle East again...
Graeme B
on January 07, 2009
at 02:08 PM

I think the US will be in a worser shape than Europe. The US has everything going against them.(Demographics, Peak oil etc) The only exception is their military/industrial complex.

So hopefully the Brits wont for the third time invite the Yanks into a European war. With devastating consequences for Europe. After all they are the 51:th state.
Lennart
on January 07, 2009
at 02:08 PM

So tell me, Ambrose, how printing 800 billion in new dollars to stimulate the economy keeps the dollar strong? The Chinese have lost their appetite for US treasuries, they will likely start to dump these reserves as soon as they figure out their domestic demand problem.

The future is bleak for the US dollar. I pity anyone who takes your advice.
Michael Johnson
on January 07, 2009
at 12:03 PM

I think the title of the article is the give away.Semi-conscious when he composed it and semi serious when the editor viewed it.
JT
on January 07, 2009
at 12:03 PM

"Indeed, the rest of the world would be far better off if the continental USA split up into four or six politically independent entities, as recently predicted by an eminent Russian economist."

I was walking in Times Square yesterday when an eminent orator informed everyone in shouting distance that the CIA had planted a microchip in his left buttock and that Chairman Mao was beaming messages into his head via microwave.


Jason
on January 07, 2009
at 09:30 AM

At some point the piper has to be paid, and I don't think he will want it in US dollars. It is insane reasoning to believe that an economy can function and flourish by simply printing as many trillion counterfeit non-backed dollars as their printing presses can pour out. Would you, generally speaking like to be paid in American dollars over the next couple of years, I won't.
Paul McLean
on January 07, 2009
at 09:30 AM

Errol Flynn is so, so correct. I am amongst the formerly brainwashed american public.

The America that my forefathers fought & died for was killed off long before I came to be. 1913 was the year to be exact. The Federal Reserve system, put in place by European bankers have been the ruination of this once great republic.

The removal of the US dollar from the gold standard was the checkmate move.

Embrace the horror & watch while we kill ourselves and quite possibly the entire worldwide monetary system.

Please, I beg of you. Deliver the death blow & remove the US dollar as the reserve currency before we bring the rest of you into the abyss.
Kevin (a former pawn)
on January 07, 2009
at 09:14 AM

"Have you not been reading Ambrose's comments over the past year or two? He has been spot on."

We must be reading different Ambroses. The one I read has been consistently wrong on the Euro, as events have proved. 'Commentators' like AEP have created an 'anti-Europe' herd mentality in Britain. As a result we are now stuck here on our impoverished, devalued sterling island, the poor men of Europe, paying through the nose for all necessary imports with our shoddy pounds - and too poor to even move to Euroland now. Thanks a lot Ambrose.
Richard Lewis
on January 07, 2009
at 09:11 AM

"If we choose we can live in a world of comforting illusion."
-Chomsky

Ambrose, your scenario is very plausible.
Daniel Shays
on January 07, 2009
at 08:27 AM

I agree with the majority of his macro-economic prognostications. Those who think the US is doomed to collapse in 2009 are WRONG. If you read Buiter, he even says TWO YEARS to FIVE YEARS. Idiots. Short the dollar this year w/ 50x leverage and get eaten alive. Suckers.

Also, those of you who think that the US debt is OUR problem and not YOUR problem are also dead WRONG. The reason the deficit is so huge is because China refuses to let its currency float freely and artifically keeps it over-valued, pushing more debt onto the US. You have to keep in mind that foreigners hold our debt and they will eat s*** too if it does hit the fan. You idiots.
PPP=PPP
on January 07, 2009
at 08:26 AM

Re Errol Flynn's comment about the US securing it's border with Mexico: We need those workers. Legalized abortion has killed over 40 million babies in the US since 1973. Today, at least 50 % of those could be in the labor force, but are not. Therefore the need for the mexican labor. Somewhay like Germany at the end of WWII. They needed foreign workers to grow.
Richard D
on January 07, 2009
at 08:25 AM

Gspan's dog: So if "everyone" dumped the US dollar - exactly where would they put their faith ? In a Eurozone slow to act ? Or an Eastern promise that's only good as long as the West is consuming ? Not everyone can buy gold - most wouldnt entertain the idea.
Actually the last 6 months has shown that the place of rest for those concerned is the US bond market.

AEP - your inflation point is the most interesting. How do we identify the turning point, where reflation turns to inflation ?
US M2 Money supply figures have shown good growth for 5 months now giving a supporting wind into the summer (good leading indicator ?).
UK money velocity is bad (no lending) - what is the level of Euro money supply/velocity as that surely points the direction of the Euro zone?
What leading indicator should we follow that shows up inflation ?
sixpack
on January 07, 2009
at 08:25 AM

Peter Cooper
on January 06, 2009
at 08:34 AM

Actually, Peter Cooper, Ambrose rarely gets anything right (it's a fluke if he does) and he often contradicts himself - for all the time he spent in Washington he knows nothing about the US and the US economy (probably because he didn't bother visiting the rest of the US).

The US is finished - many middle-class Americans are working 2 jobs andstill are having problems meeting their financial commitments.. I could go on but why bother.
H. Sadler
on January 07, 2009
at 08:25 AM


If you were able to look from shore to shore in America the short sightedness of each comment predicting the collapse of the US economic position of the and prospects would, I think, be more clear. The US economy's strengths are in its assets and investments of its people who, by all accounts, right or wrong for better or worse, are people of action and ability. The US has a solid infrastructure and possesses abundant resources in material and man power that can be applied more readily to economic woes due to access and unity than much of the politically and culturally fractured friends across the pond who tend to debate cause, rationalize blame, and debate themselves into mobs of discontent before they act.

No matter the numbers at the end of the day, the US commands 23% of the world's total GDP and that won't change. The ship is the ship and we are all in it.

Let me put it in these terms:
The $billion/trillion number in each economy will shrink in world recession and reflect the depth of the US recession. In many cases that reflection will be an amplification of the US recession.

Old Glory
on January 07, 2009
at 08:25 AM

"Obama's America will shine... As first into the crisis, it will be the first to hit bottom."

There you have it. The US will shine because the US leads and all others follow. The rest of the world has been copying our financial engineering techniques for the past 30 years, not realizing that they best benefit the originator of the ideas involved.

If you play our game, you're going to lose. Japan learned this in the '80s, China is learning this as we speak. Who's the next contestant? Time will tell.
Damn Yankee
on January 07, 2009
at 07:55 AM

Ambrose has now lost touch with reality in the Anglosphere. (Many of his other predictions are spot on). A lot of this aricle can only be viewed as agitprop.

The US state owes its citizens and other over 60 trillion dollars.

I believe it was Sherlock Holmes who said:

"when all other explanations have been disproved, the only explanation left, however improbable, must be the correct one"

Although logic tells us the USA can only produce this money by printing it, most of us still find it hard to believe the Bernanke will do it.

And yet, as you read this, the FED is already in the process of creating dollars at a rate of trillions of dollars a year.

It will meet its obligations - and in so doing destroy the dollar.

It is amazing to see the US financial authorities use this crisis as an opportunity to camouflage their hyperinflation of the Federal Reserve Note.

Dollar holders are going to be crucified. That is not a prediction, that is a matter of financial logic.
huw
on January 07, 2009
at 07:54 AM

A country that is the biggest debtor in the world, has an insolvent banking system and not much productive capital will be the leader of the global economy? How does that work in the real world?

Given the fact that the US is busy printing as much money as it can and needs to borrow from nations that actually save I doubt that it will do as Mr. Pritchard suggests. While it may do better than Europe I would still rather look to Brazil, Singapore, Canada or China as much safer bets and would rather own gold than the US dollar.
Vangel
on January 07, 2009
at 07:53 AM

Great article.

In case you are wrong in such a serious issue will you consider, next year, to resign from your current position at the Telegraph and change career?

You see, the Euro is still here, 10 years later. I would expect that, if people make their living of making forecasts and comment, and they make such big mistakes, that they behave like grown ups and take the obvious step when they make such gross mistakes.

I invite you to re-evaluate your predictions in 2010 and either inform the world that you were correct, or that your forecasting abilities are not to be trusted and you that will pursue another career.

In this case, and contrary to the Euro predictions, your forecast has a clear timespan, 2009. I am pretty sure that you will be profissional and honourable enough to take the right steps in 2010.
Tiago
on January 06, 2009
at 02:35 PM

The future depends on our politicians. They must unleash the economic warriors, the entrepreneurs.
We must produce our way forward.
Just like the USA. The USA must stop making un-economic cars that nobody needs, badly at that. We must slap a 15% tax on profits from single home sales (expenses allowed), more on second homes. This will mean that house prices will no longer warp the real economy, and compete with it for resources. We must open the mines and produce raw materials.
A real enduring wealth will be created. Stimulating the false economy of the past era will be a disaster.
It is interesting that the Madoff pyramid scheme that has lost billions of investors money, bears similarities to the worlds economy of the past 10 years. It had to end, the only question was when. We have been duped by politicians who pretended to riding the tiger, but were simply holding on and praying for survival.
Richard Kightley
on January 06, 2009
at 02:27 PM