2011 likely will open with a deepening recession, increasing austerity, and falling asset prices. I expect these developments not to happen gradually, but to come in great waves.

John Browne, Euro Pacific Capital at Business Insider

EXCERPTS:

For now, major governments such as the US and EU have been able to continue to borrow and spend licentiously to fend off the threat of deflation and keep their economies stimulated (the US is by far the greater offender).

But three surprising and powerful changes threaten the viability of a long-promised “exit strategy.”

If the central banks of the EU and the US choose to unleash even more massive reflationary programs, then a period of crippling inflation could be the outcome. This will form the basis of monetary chaos and prolonged economic stagnation, the most damaging of all economic conditions. In these circumstances, the prices of needed raw materials and commodities, including precious metals and energy, would explode in dollar terms.

One of the founding myths of the modern global financial system was that governments, especially of the developed democracies, could borrow endlessly without consequence.

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