Quote of the Day: Double Dip or Not

I really liked this quote from Felix Zulauf’s August commentary:

“Hence, the key question is not double dip or not but how good will economic growth be in real and nominal terms.

When an economy shows the weakest recovery on record despite of the biggest monetary and fiscal stimuli on record, something is definitely different from previous cycles. In our view, it is debt deleveraging. So far, the US consumer and financial institutions have undertaken steps and decreased leverage to some degree but we are nowhere near the end of this process. At the very best, it will take another 2 years but most likely longer until that process is complete.

In the meantime, household income growth or the lack thereof will become the decisive factor. At present, it does not look very encouraging as it is stagnant in most countries or anemic at best. Moreover, in the US, housing is an important balance sheet item for the average household and those prices continue to erode.

Hence, we do not see a lot of hope for a normal recovery pattern. In Europe, the discussion about retirement age has been launched whereby the proposal is to hike the age limit decisively as mathematically there is no way that these pensions can ever be financed based on demographics and tax revenues in a low growth environment. This blows away many dreams of a relaxed retirement period and forces households to save more . . .”

Interesting stuff.

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