World Bank Warns of Deflation Spiral

[peaceandlove]

World Bank Warns of Deflation Spiral

The World Bank has given warning that global economy will fall into a "deflationary spiral" unless urgent action is taken to reduce high levels of excess capacity in industry.

By Ambrose Evans-Pritchard
Published: 6:21PM BST 15 Jul 2009

Justin Lin, the bank’s chief economist, said factories running idle around world threaten to trap economies in a vicious cycle, risking further spasms of financial stress, requiring yet more rescue packages.

"Significant excess capacity has been built up and unless this issue is addressed, we will face a deflationary spiral and the crisis will become protracted," he told an audience in Cape Town.

Mr Lin said capacity use had fallen to 72pc in Germany, 69pc in the US, 65pc in Japan, and as low as 50pc in some developing countries, mostly touching lows not seen in modern times.

The traditional cure for countries caught in slumps is to claw their way back to health through devaluation, but this cannot be done today because the crisis is global...

Continues: http://www.telegraph.co.uk/finance/f...on-spiral.html

SOURCE: http://solari.com/blog/



"A Tremendous Secret"

7/14/2009
by John Rubino

Last week FOFOA posted a long article on the coming devaluation of the dollar and how it might play out. He thinks it will be sprung on us without warning -- sooner rather than later:

EXCERPT:

”Some US embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of US cash to purchase currencies from those govts, quietly. But not £’s. Inside the State Dept there is a sense of sadness & foreboding that ‘something’ is about to happen, unknown re a date—just that within 180 days, but could be 120-150 days.”

Bob quotes another source that “Panasonic has told their people to be back in Japan by Sept 09.”

Harry Schultz’s remarkable take on the situation:

“My HSL suspicion is that the elite plan another FDR style “bank holiday” of indefinite length, perhaps very soon, to let the insiders sort-out the bank mess which is getting more out of their control every day. Insiders want/need to impose new bank rules. Widespread nationalization could result, already under way. It could also lead to a formal US$ devaluation, as FDR did by revaluing gold (& then confiscating it). But devalue against what? The euro? Doubtful. Gold? Maybe. Or vs. the IMF basket of currencies (which seems more likely)—& much in the news recently.

Any kind of bank holiday will push the US$ lower, which may be a bonus benefit to their ongoing scenario of letting the $ fall. Such a fall would get the devaluation they want without having to declare it. In sum, the insiders want more bank & system control, fewer banks & a lower US$. A bank holiday would suit all their needs."

Continues: http://www.dollarcollapse.com/iNP/view.asp?ID=102

SOURCE: http://solari.com/blog/