Albert Edwards joins RBS in warning of a new crash, saying oil price plunge and deflation from emerging markets will overwhelm central banks, tip the markets and collapse the eurozone
The City of London’s most vocal “bear” has warned that the world is heading for a financial crisis as severe as the crash of 2008-09 that could prompt the collapse of the eurozone.
Albert Edwards, strategist at the bank Société Générale, said the west was about to be hit by a wave of deflation from emerging market economies and that central banks were unaware of the disaster about to hit them. His comments came as analysts at Royal Bank of Scotland urged investors to “sell everything” ahead of an imminent stock market crash. Continue reading
With the possibility of Greece, already in shambles and under consideration of exiting the Eurozone, the Euro most likely could afford to absorb the loss of one member nation. However, with Italy and Spain on the brink of disaster themselves, there is no way of controlling what will be an outright implosion of the EU. Should that happen, and it’s likely a gaurantee at this point, you could likely count the days on one hand until the United States follows suit.
The situation in the euro zone has become so bleak that it is giving rise to the most improbable rumours. The latest to make the rounds of European hedge fund managers suggests that the euro will be tied to the dollar at close to parity, a dramatic fall from its current level of just under $1.30 and one that would involve the printing of hundreds of billions of euros.
If the euro collapses that will be especially bad news for China though, since 18 per cent of China’s exports go to Europe. In April, Chinese exports to the euro zone were down 2.4 per cent from a year ago, according to broker CLSA. Some of those exports were from German makers in China itself. For example, Pakistani textile mills have recently imported capital equipment from Siemens plants on the mainland. But if the euro sinks, German manufacturers will export from home rather than from their Chinese factories.
Some analysts suspect that China has been trying to support the euro and indeed, data from BNY Mellon suggests that as the growth in Chinese reserves slows, the euro falls.
Meanwhile, the liquidity from the excess printing of money especially in the U.S. continues to spill over into the rest of the world.
Full article: Euro Fall Would Raise Stakes for China, US (CNBC)