Monday, August 25, 2008

About the economic crisis

The present economic crisis reminds me of the 1970s. Then too we had oil peaking followed by an economic dip. And people were talking about Japan at that time in a very similar way they talk about China now. Even the word stagflation seems to come back again.

In both periods the West is spending suddenly much more in other countries (more expensive oil; more imports). My feeling is that it takes some time for our economic system to realize that we have less to spend. So we keep spending while we also get investment and purchases back from the countries that get the extra money. So for some time we have a boom... And then we get a painful adjustment. Extra painful because it is retarded.

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