Second dip…..!!!!!

Many of the economist and financial market guru’s believe that the next financial crisis may be in 2011. Some of those believe that this might be a dead cat bounce, or what economists term a double-dip recession.

But looking at the global market (as on today) seems that we are very close to the double-dip recession say by 3-6 months. The reason for me to believe this is because of all the global indexes falling below there support levels (US, India, Hong Kong).

Indian stock market are heading southwards from last 4-5 trading session and have broken there support level. These support level were crucial according to finance experts (I’m not among them) .

Keeping my fingers crossed for today’s opening bell, I pray to god that the index should open with a positive note as all the major global indexes are in +ive.

The reasons why we might be headed for a double dip recession based on artilce published in ft.com

1. Oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand.
   
2. There are risks associated with exit strategies from the massive monetary and fiscal easing, If policy makers want to reduce fiscal deficits they will raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation. But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation.

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