December 31, 2009 Patrick Oliver-Kelley

The calamitous economic decline experienced worldwide, over the past two years would normally be followed by a robust recovery. Not so, this time around. We are in a dull heavy calm …and this is best we can hope for.

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In 2010 the US economy will struggle to show 2-3% real GDP growth. Interest rates will remain low but unemployment will remain high or even rise. The government stimulus plans are, and remain, too small. Jobs have simply evaporated. Replacing them with new industries and employment is a slow process, particularly with credit scarce. Innovation is our hope. Where is Silicon Valley, Boston, Austin, Denver, Miami and New York? Come on guys, roll your sleeves up and pull up your socks.

Ex Fed Chairman Paul Volcker sensibly suggested that Banks be legally barred from proprietary trading of speculative financial instruments. Let hedge funds do as they want, they can go bankrupt for being wrong. But it is their money they are losing, not the taxpayers’.

 We cannot say that about our banks, as Citigroup and Bank of America among others, gleefully learned.  They are too big to be allowed to fail. At this moment the banks are laughing behind their hands. They are up to their old tricks: trading currencies, and financial futures, rewarding huge bonuses, already. With your money!

We must build a financial system that produces long term businesses and business credit, not credit for speculation.

The post-crisis economic landscape is becoming clearer. High Debt and high unemployment rates imply a long hard slog. We must devise strategies for future growth rather than tactics to exploit anomalies in the market. Emerging markets: India, Indonesia, Brazil, Russia, South Africa and China are key to growth. With the US, China has become an indispensable nation.

In 2010, We will remain in an environment of pervasive tension. “Where is John Gault?”

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