Bailout plan won't help, claims investment adviser

In January, as global stock markets took a beating from the collapsing housing-debt bubble in the U.S., Vancouver-based investment adviser Ian Gordon told the Straight that “the worst is definitely in front of us, and not behind us”.

After a few months of relative calm, turmoil hit the markets again in September. Members of the U.S. House of Representatives will try once more today to approve a bailout plan for troubled financial institutions.

However, Gordon, a proponent of early 20th-century Russian economist Nikolai Kondratieff's wave theory of the cycles of capitalist systems, doesn't have much confidence that a bailout would make things much better.

He explained that the situation today is different from the one following the 1929 U.S. market crash, which precipitated a devastating economic depression. At that time, the U.S. was the world's largest creditor nation, so it could effectively refloat the economy through public spending.

“But today, the U.S. is the world's largest debtor nation,” Gordon told the Straight by phone on September 30. “And so to ramp up the spending is almost impossible, because eventually so much of that debt is financed by foreigners. It's not financed within the United States, because there are no savings to finance it.

"Foreigners are going to balk and say, ”˜We're not giving you any more money.' So it comes to a stage where interest rates are going to have to rise to try to attract money to the United States.”

Gordon suggested that banks are so badly burned that they won't be pushing a lot of money into the economy.

“They're just going to repair their balance sheets, but the economy cannot get restarted,” Gordon said.

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