Towards the coming economic crisis



Posted by Ed 25 days ago

“The world economy has not been in a more precarious situation in over a decade. Growth is faltering everywhere, with the Eurozone flirting with recession, while central banks have returned to monetary easing after just one year of global tightening.

“It is imperative to appreciate the exceptionality of the situation. Never before has the world gone into recession with interest rates so low and with the balance sheets of central banks so massive. This time truly is ”different”…

“No one dares to look at the facts – or if they do, they dismiss them. Denial is a powerful force.

“The fact is that monetary policy is running on empty, at least in the Eurozone, and governments can provide only limited fiscal stimulus. We’ve reached the end. There’s nothing left to do than prepare for the crisis and wait. And to be very afraid.”


Ed 24 days ago
 Global slump is coming and we don’t know why
“The rules and models that economists have relied on for decades seem to be failing. With interest rates still stuck near zero we no longer have the ammunition we once did to confront any recession. To top it all off, China and the rest of the emerging and developing world are slowing even more markedly than the West.

“The engines that powered the world for the past decade are faltering. The odd thing is that this has garnered so little publicity, though given that there is so much else going on to distract us perhaps that’s no surprise… Everyone is slowing but some more than others.

…in recent months the main thing worrying importers and shipping merchants is not Brexit but the fact that their warehouses are no longer filling up with goods from overseas. The ships coming into port are not so heavily laden, air cargo holds are increasingly empty. Global trade is grinding to a halt.

Again, the conventional wisdom is that this is down to the US-China trade war, but while that has affected the nature of some trade routes, forcing China to start importing its soybean from elsewhere, it does not explain why trade is falling globally.

So what is going on? Well, one possibility is that China’s almighty debt bubble is finally deflating, or even imploding, but don’t expect Beijing to let on about it for some time…

The scariest explanation is that in trying to solve the last financial crisis we fuelled a deeper malaise in global economics… The bad news is that economics as we knew it seems to be broken. There’s no guessing how or when we can put it back together again.

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