From Tuomas Malinen’s Forecasting Newsletter.
Global financial system has recovered from the Great Financial Crisis, somewhat, during the past few years.
The world economy has not.
Several developments threaten to de-rail the “recovery” (there’s no such thing; just more utterly unsustainable debt-stimulus).
In this entry I am going to take a walk down the memory lane. In March 2017, GnS Economics published a warning of a global crash in a piece entitled Bellwethers of a fall. In it we noted that:
To summarize, it is our view that the bubble in the world economy has just come too big to avoid a massive correction. Without some kind of “divine intervention”, the bubble will burst and the world economy will crash. We just do not know the exact date of its demise. The first signals of the bursting of the bubble could include increasing fluctuations (mini crashes) in the asset markets and stress on the money markets, especially in the inter-bank markets.
And that:
How long can this all continue? The simple answer is: As long as governments and central banks can keep it going. World economy has been supported by China recently, so a lot depends on what kind of a policy China takes. The asset purchases of the central banks will be limited by the assets available. The ability of central banks to act in a crisis is also questionable as they would suffer crippling losses if bond markets crash.
As we now know, governments and central bankers have ‘kept it going’, thus far. Here I am going to update the crucial figures behind our warning to see, where we stand now. I also provide clues to help you to forecast the important short-term developments, ranging from a likely liquidity withdrawal to Houthis
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