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World economy to fall into Great Depression by 2014: expert Gambles

BANGKOK -- Well-known regional financial expert Paul Gambles expects the world economy to fall into another Great Depression any time between now and 2014, and that it will last for five to 10 years.

The MBMG International managing partner who appears frequently on CNBC and other media and at financial events said: “Our best case is that stocks will fall 30-40 percent from where we are now. The worst is hard to predict, but during the Great Depression in 1930s, U.S. stocks dropped by over 90 percent.” MBMG is a global financial advisory service.

Speaking to The Nation in an exclusive interview, Gambles said it was not possible to predict the exact time of the global economic collapse, as it would depend on what financial event triggers it, which would be very much a political decision.

Nonetheless, he said, “There are two economists who are the most influential on my economic thinking: One is Adam Smith, and (the other is) Nouriel Roubini or 'Dr. Doom' ... he believes 2012 or 2014 is the maximum point we can get to without some event” triggering a major crash.

“Unless you are prepared to lose 40 percent of your assets, which you might not ever be able to recover, you should completely avoid equity exposure right now,” Gambles said.

A professor at New York University and chairman of a consulting firm that bears his name, Roubini earned the nickname Dr. Doom for correctly predicting the financial crisis in 2008.

Gambles said MBMG had predicted since last year that “the four horsemen,” comprising the United States, the United Kingdom, Japan and the eurozone were getting close to the “apocalypse” or “the end of the world.” Governments are repeating the mistakes they made in the 1920s that led to the first Great Depression, such as accumulating huge public debt, distributing wealth poorly, and tolerating low productivity. Therefore, he said, no central banks would be able to stop a recurrence of the depression.

“Now we have changed that view slightly. We think it will happen for sure. And China is now exactly in the same situation,” he said.

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