Few people understand the global economy and its (mis)management better than David Stockman — former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier.
David is now loudly warning that events have entered the crack-up phase, which he predicts will be defined by the following 4 developments:
- Increasingly desperate moves by the world’s central banks
- Increased market volatility and losses
- Deflation in industrial and commodity prices
- Decreasing demand due to Peak Debt
As the crack-up phase gains momentum, he predicts an increasing number of “financial breaks” that will add to the unpredictability and instability of the environment for investors. Even ‘dancing close to the door’ sounds excessively risky at this point.
We’re in the crack-up phase. I think there are four big characteristics of that which are going to shape the way the economy and the markets unfold as we go forward.
You’re going to see increasing desperation and extreme central bank financial repression because they have gotten themselves painted so deep into the corner that they’re lost and desperate. Almost week by week, we have another central bank – this week, it was Sweden – lowering their money market rates into negative territory. The Swiss Bank is already there, the Denmark Bank is there, the ECB is there on the deposit rate, the Bank of Japan’s there. All of the central banks of the world now are desperately driving interest rates into negative territory. I believe that they’re lost; they’re in a race to the bottom whether they acknowledge it or not. The central bank of China can’t sit still much longer when the reminbi has appreciated something like 30% against the Japanese yet because of the massive bubble of monetary expansion that’s being created there. So that’s the first thing going on. Central banks out of control in a race to the bottom, sliding by the seat of their pants, making up really incoherent theories as they go.
Full article: David Stockman: The Global Economy Has Entered The Crack-Up Phase (Peak Prosperity)