I think one needs to look at the Global Economy as if it is a slow-motion unraveling show.
Nobody wants a depression, hence the manipulated data and positive news issued by more or less thought controlled main media.
China can't afford one as this could cause violent upheavals in the cities where some good money is being earned now.
It is only at the start of what it is trying to achieve and certainly would get hard hit in any depression.
It exports some 30% to the US (35-40% of this is produced by factories owned by foreigners).
They can't afford to lose those customers in a depression.
The US has been manipulating the GDP and the CPI indices for quite some time so that the issued infation rate of 2.5% this year will in fact be about 6% (Williams). Hence the interest rate rises. (If they say there is no inflation then there is no need to raise interest rates).
This in turn affects the net GDP which according to Williams ought to be about flat at present (Deflator increases).
The attention is not being drawn to any negative event (The cost the war in Iraq and residence of troops in Afghanistan are not part of the Budget Deficit but instead is quietly added to the overall debt. Conditional sales data of Boeing planes, although not yet delivered, are added to the Overseas trade data instead of withheld till the planes are delivered.
US economists and others working for many Wall street firms and main communication channels have been issued with rosy glasses. No jobs for them who don't want to wear them.
The US obviously can't afford either a recession or a depression as it has an ever increasing masssive debt load to service.
Should there be a depression then it will not anymore be able to service this debt because much less tax will come in it and will print money instead to pay for it.
The other countries won't be able to finance much of the US debt as they have less incomes and in some cases are printing money as well to finance their own debt.
That makes the situation in the US worse as they need to monetize a lot more debt. That would likely result in super inflation which in effect will pulverize much debt. That would be the only positive in a very bad situation.
Much Citizens' debt will disappear as well at the same time. The middle classes and others will suffer, while many well-to-do citizens will have assets or currencies abroad.
Gold, if held by citizens of many countries may well be called in by the Governments. Some will hold Gold overseas in a safe location. Gold Stocks were not touched in the Great Depression and these stock prices ran riot.
The US dollar will be one of the currencies which will get a hanmmering and those with much better currencies or exporters will be able to buy US assets for a song.
Tradewars will reign supreme and the WTO won't be able to keep the trading partners honest.
In times like those, the EEC could well fall apart as it sofar has not reached an irreversable stage and different states may well have their narrow self interest in mind and act accordingly.
The big question will be how the currencies will survive. The Far East, Opec, Russia and some S. American countries may decide that the US dollar, once shaken down by the hyperinflation is not anymore important and could rearrange their basket of currencies.
The Chinese Yuan could become the main currency.
The question is when will there be a depression? As with the 1930 depression, everything will be done to delay it; the Wall Street guys want the good times to go on forever; the big Merchant Banks want to continue making profits from their IPO's and M&A activities and the talk about how good the US economy is, will continue.
Other countries don't want a change either, even if trading is not perfect.
So, the degradation process can be expected to be a slow one: occasionally, a spoke from the economic wheel dislodges till finally the wheel separates from the wagon.
I think that GOLD ultimately will give a signal that not everything is ok. By then, Opec, Russia, China and India wil have soaked up a lot more gold. It will be difficult for the manipulators to suppress the price of GOLD because too many will know it is underpriced and can't be suppressed.
My opinion is that next year, we my see some negative events unfolding.
