Savings Experiment: Snow Removal
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?At first, the credit crunch looked like a temporary thing. After all, top private equity firms and sovereign wealth funds invested billions into major financial institutions. It looked like a good bet. Even Merrill Lynch's (NYSE: MER) CEO John Thain proclaimed that the "worst was behind us" back in January.
Well, things haven't gone according to script.
For decades, there have been many predictions of a calamity caused by a meltdown of the complex maze of global derivatives. Maybe this time the nightmare is coming true?
Unfortunately, no one seems to have any concrete answers. However, with the liquidation of Lehman Brothers Holdings Inc. (NYSE: LEH) – as well as the government takeover of Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) – it seems reasonable that the global economy is in a perilous state.
In light of all this, may we be headed for a repeat of what happened to Japan during the 1990s, when the financial and real estate system collapsed? No doubt, policy makers aren't talking much about this.
But over the weekend, we got a sobering analysis from Tony Tan, deputy chairman of the sovereign wealth fund Government of Singapore Investment Corp., which has more than $100 billion under management.
According to him, the global economy is headed for a slowdown, which could last several years. Simply put, the process of deleveraging is brutal. We will see consolidation across various industries and growing unemployment. It will also be tougher for businesses to get capital, which will further stunt growth.
And the biggest risk is protectionism, which is a common response when there is a prolonged economic recession. But protectionism leads to even less growth.
In other words, for the next president of the U.S., there will be some critical decisions that will need to be made.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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