Mish Interview on the "Daily Bell"

Mish's wife, Joanne has passed away.  My deepest condolences to you, Mish.  May she rest in peace.

From Mish's blog:

Daily Bell: What's the future for the EU?

Mish Shedlock: No currency union in history has ever survived without there being a fiscal union as well. Since there will not be a fiscal union, the Eurozone must break up. The ideal way would be for Germany and the Northern countries to exit. The painful way will be a piecemeal exit. I expect this to be long and painful.

Daily Bell: How about China?

Mish Shedlock: China is due for a "hard landing" which I define as less than 3.5% growth for the rest of the decade. I expect commodity prices will likely crash and the commodity producing currencies such as Australia and Canada will take a big hit as well.  

The Economist believes China will be the world's largest economy by 2018. I suggest 2030 may be optimistic and Chinese growth will average 3% or less for the rest of the decade. For a discussion of the implications, please see "12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin?"

Daily Bell: If China goes into a meltdown, the world faces a full-scale depression. What's your take?

Mish Shedlock: The US will actually fare relatively well in a collapse of China. It is the trade surplus nations and commodity produces that will take the biggest hit as noted in the previous link.

Daily Bell: Where is the US headed?

Mish Shedlock: The US is headed for recession. The US recession will not be as bad as Europe, but corporate earnings will sink like a rock. The US dollar will strengthen much to the dismay of the hyperinflationists. Then, after Europe, China, and Japan take big hits, then and only then will the final plunge in the US dollar occur.

Daily Bell: Where is Japan headed?

Mish Shedlock: Japan is all but guaranteed to blow up before the US. A mere rise in long-term interest rates from 1% to 2% would consume nearly all government revenues. Ironically, I like Japanese equities but only hedged against a plunge in the Yen. After 20-plus years of deflation, Japanese companies have almost no debt but the currency risk is huge.

Daily Bell: Are you thinking of traveling abroad?

Mish Shedlock: Personal difficulties make overseas travel problematic. I am now involved in a fundraiser for ALS research (Lou Gehrig's Disease). My wife is in the late stages and nearly immobile. She has been on a feeding tube for over a year and cannot eat or drink anything, including water. So far, people from at least 22 countries have made donations. I ask everyone to please consider making a contribution. To learn how you can help, please read "My Wife Joanne Has ALS, Lou Gehrig's Disease."

Daily Bell: What do you think of US monetary policy?

Mish Shedlock: It's hopeless. We should get rid of the Fed specifically and all central bankers in general. As noted earlier, central bankers are nothing but serial bubble blowers. The irony is they purport to be "inflation fighters." In reality, central banks are the very cause of inflation. Bernanke even wants a 2% inflation target. Economically speaking, it's crazy. Eventually asset prices and wages do not follow consumer prices and all hell breaks loose, which is precisely where the global economy is today. I have some nice charts of inflation targets and real disposable income in "Huge Problem With Bernanke's 2% Inflation Target Explained in Pictures."

http://globaleconomicanalysis.blogspot.com/search?updated-max=2012-05-15T17:48:00-05:00&max-results=3&start=9&by-date=false