2023

The year everything comes to head?

From Tuomas Malinen’s Forecasting Newsletter.

Issues contributed:

• Revisiting the state of the global financial sector.

• The ‘stealth pivot’ of the Federal Reserve.

• The big “If’s” of 2023.

• The coming war economy?

Past five years have been rather grueling for a crisis forecaster. Like I mentioned before, I (we) had a great epiphany in early 2017, when we noticed that the global financial sector had not recovered from the Panic of 2008. This was no surprise as academic research has asserted that it takes about 10 years for the banking sector to recover from a financial crash.

In March 2017, we wrote:

The crisis of 2007 - 2008 reversed the trend of financial globalization, which has undermined global growth. The pull-back in financial globalization has been masked by central bank-induced liquidity and continuous stimulus from governments which have created an artificial recovery and pushed different asset valuations to unsustainable levels. This implies that we live in a “central bankers’ bubble”.

We were somewhat ridiculed of this, but that is the ‘crux’ of a forecaster. When you are constantly few months to few years ahead of most, you become a laughing stock among those, who are unable to see, where we are heading. Even more so, if the vulnerabilities you have observed fail to materialize as a crisis, because of the actions of authorities.

This became a norm in the global economy after the 2008 crisis. Politicians and especially central bankers ‘rode’ to the rescue of the global economy and financial markets every time implosion appeared imminent. Last time this occurred was in late September, when the Bank of England bailed out U.K. pension funds, and in early October, when the Swiss National Bank (SNB), with the help of Federal Reserve and the Saudi National Bank, saved the venerable swiss banking giant Credit Suisse. The onset of a global banking crisis was averted, yet again.

The question every economic forecaster is currently asking, is what happens in 2023? Like I and we have been touting all through the fall, major economic tectonic plates are moving below the surface. Many have felt the tremors, but decided to ignore them.

In this piece I will go through the main ‘burning points’ and speculate on the timing. Our three scenarios for the future paths of the global economy will be published at the GnS Economics Newsletter on Friday.

The state of the global financial system?

During this fall, I have kept an eye of the global liquidity statistics. Now, I decided to re-visit the cross-border banking statistics, from where we drew our early 2017 warning.