Global credit crunch WARNING issued on debt bubble as current trends mirror 2008 crash

A indicator tracking credit is following a worrying trend [Getty]

 

WARNING signals have been felt today after a key credit indicator mirrored the same pattern experienced ahead of the financial crisis of 2008, in a eerie sign that the global economy is heading for another downturn.

A key UBS credit impulse which monitors the changes in credit volume has tumbled by six per cent of GDP since last year.

It mirrors the same movement seen before the financial crisis 10 years ago, raising fears the global bubble could be about to burst and another credit crunch.

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The US economy grew far less than expected in the second quarter of 2016 taking the annualised rate to just 1.2 per cent – below expectations of 2.5 per cent.

At the same time, credit card and overdraft lending has soared to its highest level since 2007.

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We are grateful to Alexander Giryavets at Dynamika Capital for pointing us to something which is far more troubling than even the Atlanta Fed’s collapse in Q1 GDP tracking: namely the latest Credit Managers Index for the month of March which “deteriorated significantly over the last two months and current readings stand at the recessionary levels not seen since 2008.”

To be sure, we have previously shown the collapse in consumer debt as reported by the Fed, which as we noted, just suffered its worst month for revolving credit since December 2010 and explains “why the consumer has literally gone into hibernation – it has nothing to do with the weather, and everything to do with the unwillingness to “charge” purchases, which in turn is a clear glimpse into how the US consumer sees their financial and economic future.”

The experts who expect bonds funds to crash in 2015

Concerns have been rumbling for some time that bonds – whether issued by companies or governments – are due for a sharp crash.

At the start of 2014 many wrote off bonds and said that private investors should sell their bond funds and move into shares or other assets.

But those who ignored this advice and kept their bonds investments have done well over the past year.

In fact, as a whole, bonds have beaten equities so far in 2014.

So what does 2015 hold? Again, opinion is divided.

Study says ‘true’ eurozone stress test could show over US$1 trillion shortfall in banks

An objective stress test of the eurozone’s biggest banks could reveal a capital shortfall of more than 770 billion euros (US$1 trillion) and trigger further public bailouts, a study by an adviser to the European Union’s financial risk watchdog and a Berlin academic has found.

The study and others published ahead of the EU stress tests, whose results are due in November, are important because they set the expectations against which markets will judge the credibility of the European Central Bank’s attempt to prove its banks can withstand another crisis without taxpayer help.

1,000 companies going bankrupt in Italy every day as country faces full-scale ‘credit emergency

Italy’s industry chiefs have warned that the country faces a “full credit emergency” as thousands of companies run out of critical funding, threatening a slide into deeper depression.

Confindustria, the business federation, said that 29% of Italian firms cannot meet “operational expenses” and are starved of liquidity. It said that a “third phase of the credit crunch” is under way that matches the shocks in 2008-09 and again in 2011.