	Generational Dynamics
	Forecasting America's Destiny ... and the World's

\| HOME \| WEB LOG \| COUNTRY WIKI \| COMMENT \| FORUM \| DOWNLOADS \| ABOUT \|

Generational Dynamics Web Log for 6-Dec-06
Hans Redeker predicts "hard landing" recession to hit early in 2007

Web Log - December, 2006

Hans Redeker predicts "hard landing" recession to hit early in 2007

In the most negative mainstream media economic forecast I've seen, Hans Guenter Redeker has predicted a serious recession in the United States early in 2007. Redeker is Global Head of Foreign Exchange Strategy at BNP Paribas, the largest European banking group. He made his comments this morning on CNN International.

Hans Guenter Redeker <font size=-2>(Source: Bloomberg video)</font>

Hans Guenter Redeker (Source: Bloomberg video)

Mainstream economists recently have been predicting a slowdown in growth or, at worst, a "soft landing," meaning a recession so small we'd hardly feel it. Even normally upbeat economists lowered their forecasts over the weekend, following a report last Friday from the Institute for Supply Management (ISM) indicating an unexpected shrinking of manufacturing in the U.S. The fall in manufacturing is attributed to the secondary effects of the housing market collapse, as related industries (furniture, appliances, etc.) are also affected.

However, Redeker predicts that the effects of the housing market collapse are worse than most economists are predicting. He indicated that the effects may start to become evident on Friday when the November employment report comes out.

Euro to Dollar exchange rate for last year

Euro to Dollar exchange rate for last year

The value of dollar against the euro has fallen sharply in the last year, as shown in the adjoining graph (which shows that the value of euro against the dollar has been rising). This fall in the dollar, which Redeker says has been expected for a while, has been accelerating in the last few weeks. Redeker says that BNP Paribas' forecast is that the dollar will continue to fall, to $1.35 per euro in the first quarter, and to $1.40 per euro in the second quarter.

Redeker is also deviating far from mainstream Fed forecasts. He's predicting that the Fed will lower interest rates very rapidly next year, totaling a 2.5% reduction by the end of 2007. He says that for the first time in years, interest rates in Europe may be higher than those in America.

From the point of view of Generational Dynamics, the piece missing from all this is the piece whose timing can't be explicitly predicted: A generational panic and stock market crash.

Major international financial panics have occurred throughout history at regular 70-80 year intervals. The major financial crises since the 1600s have been identified as follows: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857 (Panic of 1857), and 1929 Wall Street crash.

At the present time, the stock market is overpriced by a factor of about 240%, and with price/earnings ratios around 20 or higher since 1995, a panic is long overdue. Such a panic is expected to lead to a fall to the Dow 3000 range, with the price/earnings ratio index falling well below 10. Note that the P/E ratio index has fallen below 10 several times in the 20th century, most recently in 1982, so this is a common occurrence.

The world is changing very, very rapidly right now. As I'm writing this, the Iraq Study Group report is being released. Despite the giddy expectations that politicians and journalists have for this report, it apparently has no great solutions, and doesn't call for any scheduled withdrawal. This is no surprise to any regular readers of this web site, but there may be a strong public reaction when it sinks in that we're still "trapped in Iraq." Public opinion is changing rapidly these days, moving in the direction of becoming increasingly confrontational, and a "hard landing" recession can only accelerate the confrontational mood even more. (6-Dec-06) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Web Log Pages

Current Web Log

Generational Dynamics Web Log for 6-Dec-06 Hans Redeker predicts "hard landing" recession to hit early in 2007

Web Log Pages

Generational Dynamics Web Log for 6-Dec-06
Hans Redeker predicts "hard landing" recession to hit early in 2007