I have been watching the economic indicators closely since I was a teenager. I don't know why but I took a special interest in watching, monitoring the economy and correlating the eventual outcomes with what I saw. My interest intensified further 2 years ago when the subprime crisis occurred and have watched the economy more closely than before.
Earlier I posted 2 articles about the problems with sovereign debt - one in March 2010[Link] before the European sovereign debt crisis intensified and the other in early May 2010[Link] when things started going wrong. The subprime crisis and the sovereign debt crisis are just manifestations of problems caused by a debt ridden global economy. Early this year, I thought there were 2 possiblities going ahead - the 1st, global growth will accelerate in 2010 and ease the debt burdens around the world, the 2nd, is that we cannot make the escape velocity and the economy falters and the debt problems start to overwhelm the global economy. Watching the economic numbers out from all over the world, I now believe only the 2nd hypothesis is left standing. Many people call this the "double dip recession" scenario. I believe calling it that is too optimistic because it suggests that we will recover quickly after the 2nd dip. They called the first dip in 2008-2009 the Great Recession. The American govt and govts around the world mask the severity of economic problems by using fiscal and monetary stimulus. The problem of high debt never disappeared and part of it has returned to haunt us through the Europeans. The game plan of generating sustainable economic growth using stimulus appear to have faltered looking at the latest US jobs report.
In Singapore, many made the same mistakes as the people in Spain, Ireland, US etc. Remember the US housing bubble which was believed to be caused by interest rates being too low for too long. The same phenomena was seen in Spain and Ireland - today Spain's economy is in big trouble with 20% unemployment and a large part of its problems caused by the bursting of its housing bubble. After the western countries got into trouble with housing, we saw property bubbles in China, Hong Kong and Singapore. These bubbles create a lot of economic vulnerability when economic growth slows, the debt becomes a problem.
There were also many imbalances that resulted from the last 4 decades of economic growth include large income disparity which is only seen once other time in history ...before the Great Depression. Wages of workers have been kept too low for too long and demand was generated by the expansion of debt. Westerners borrowed heavily to buy good produced by poorly paid workers in Asia.
In the coming months, I believe, we will first see more signs of a slowdown....this is a bit hard to imagine in Singapore because we just reported the fastest export growth in past few years just last quarter but look out for it as the demand from major our trading partners slow and after that there will be no quick solutions to the economic problems that emerge because they have been in the making for decades.