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Monetary Bazookas Or Not, "Global Crisis Is Inevitable"
Submitted by Saxobank's Dembik Christopher via TradingFloor.com,
- There is an "inevitable" global financial crisis on the way
- We are near the end of the global recovery cycle even if it may not feel like it
- China could delay the crisis through a QE 'monetary bazooka'
- A new paradigm is emerging but we could jump from deflation to hyperinflation

Reuters Plaza in Canary Wharf is a symbol of the global economy, but, accommodative policies notwithstanding, a "global crisis is inevitable". Photo: iStock
Until recently, the consensus assumed a strengthening of the global economy in 2016. It won’t happen. If the global economic growth manages to reach 3.1% next year, as forecast by the IMF, it will be a miracle.
We haven’t realised that the global economic recovery is already here for over six years. This recovery phase is weaker than previous ones and much more disparate.
Since the onset of the global financial crisis in 2007, the potential growth rate has been much lower everywhere: from 3% to 2% for the US, from 9.4% to 7.20% for China and from over 5% to below 4% for Poland.
Many regions, such as the euro area, have remained on the sidelines and experienced stalling economic growth. Over the last two decades, economic cycles have been shortened due to the financialization of the economy, trade globalization, deregulation and the acceleration of innovation cycles.
Since the 1990s, the US went through three recessions: in 1991, 2001 and 2009. It is erroneous to believe that the recovery has just begun. We are close to the end of the current economic cycle. The outbreak of a new global crisis in the coming years is inevitable.
The lack of economic momentum next year and short periods of deflation related to falling oil prices will certainly push central banks to pursue their disastrous “extend-and-pretend” strategy which will increase the price of financial assets and global debt.

Low oil prices will see central banks revert to 'pretend-and-extend' policies. Photo: iStock
The European Central Bank could push further interest rates into negative territory and could increase or lengthen the purchase program. Several options are on the table: the central bank could drop the 25% purchase limit on sovereign bonds with AAA rating or could add a program to help the corporate bond market.
Following the same path, China could take out the monetary bazooka in the first half of 2016 by launching its own version of QE-style bond buys. Along with a dovish monetary policy, China could implement a massive Keynesian stimulus programme, relying on the already-expected bond issue plan which could raise 1 billion yuan.
This move could temporarily reassure world markets.
The only central bank that has a leeway to hike rates is the US Federal Reserve. 52% of investors expect a tightening of US monetary policy in December. However, the speed and magnitude of tightening will remain low. It is unlikely the rates will be back anytime soon to where they were before the global financial crisis. Too high interest rates could cause a myriad of bankruptcies in heavily indebted industries, such as the shale oil sector in the US.
The Fed and other central banks are in a dead-end having fallen in the same trap as the Bank of Japan. If they increase rates too much, they will precipitate another financial crisis. It is impossible to stop the accommodative monetary policy.

China could open the QE floodgate to help alleviate the global economy, temporarily. Photo: iStock
Because of the persistent low-rate environment and the risk of a new global crisis, finding the right investment has never been harder. No one is able to know the outcome of the central bank printing press.
The world could go from deflation to hyperinflation without a stop in between for inflation as predicted by Nassim Taleb. In this uncertain context, gold remains certainly the best investment that can be used as a hedge against the coming crisis.
Since the sudden drop of the EURCHF floor last January, the Swiss franc is no more a reliable safe haven. This decision has hurt irremediably the Swiss National Bank's credibility. Investors understood they cannot blindly believe the words of central bankers.
Although the yuan is not a safe haven, it may be the right time to invest in the Chinese currency. It is well-placed to grow in popularity and become stronger.
By the end of 2016, the yuan could be the third most traded currency in the world, behind the US dollar and the euro. The new Silk Road has been probably the most ambitious global economic strategy in the past 50 years. It is likely to succeed and to push investors to hold more yuan products.
The paradox of the current state of the economy is that innovation clusters, linked to cloud computing or digital fabrication for instance, have never been so numerous and the growth so weak. The economy is switching to a new paradigm.
The three biggest trends for investors are related to changing global demographics, low economic growth and climate change. An aging population will boost the development of elderly care services. Greater inequalities between the haves and have-nots will stimulate shared creation, production, trade and consumption of goods and services by different people and companies.
The energy transition towards renewable energy will encourage the development of financial products still little used, like the green bonds. It is a very challenging time for investors because financial markets have never been so much influenced by central banks but plenty of investment opportunities exist in the new economy.

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100% true. Central banks lost. Doesn't matter what they do now.
Well then, let's just get drunk and screw
Jimmmmeeeeee.
If we all borrow enough, the benevolent governments of the world can drop it out of a helicopter to help us.
Sorry bankers, your time is up.
No loans, no increase in money supply.
And you all know where most of that increase comes from.
Sincerely,
The Human Farm
Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
I'm going long moss. It's great insulation for your cave walls.
Just leave out the narrative of climate schmange, will you.
It is junk science, driven by politicians
Moss martket also in bubble, manipulated, algo-driven.
No, not you; them. Their only possible escape at this point is to get as much as they can and hide themselves away in their bunkers before the howling wind that is their debt slaves shatters the windows of their institutions.
Our charge is as it always has been: expose them to as many people as possible and educate everyone on what changes need made when it all comes down, lest the cycle just continue with new schemers lying to an unintelligent population.
Bring. It. On.
Let's get this fucking over with already. I want to rebuild my country, assuming I survive fighting for it.
We are about to go into a period of cascading financial failure and increasingly-desperate nation state and international order actions to prevent the results hurting the elites.
That is always how it works. This time, however, we peasants are armed and can communicate with each other.
The march toward war to maintain their mansions and executive privilege cannot be tolerated any longer.
Pitchforks or KickeEnder accounts is becoming our only choice. The fed will choose to inflate. We citizens will choose bitcoin and KickEnder for the same reason : less pain tomorrow, less commitment, the easiest path by far. And so we will drift into a culture of internet assassination.
https://thinkpatriot.wordpress.com/2015/07/05/bunny-bangers/
They are herding us to hatred and war. Again. Again against our individual interests. Why are we tolerating this shit?
Because those of us who recognize it as shit are too old or too poor to fight other than with words and they do not amount too much.
We have 2 reasons for the demise: 1. Financial leakage through the wars - financial leakage that does not produce anything. 2. Flexible jobs mean insecure incomes, mean holding off spending, mean weak economies = no growth, means more borrowing to prevent famines.
We are too lazy, too pampered and too coward to fight. Everything else is an excuse.
Yeah, plenty of investment opportunites exist in the new economy.
Since Dembik the Magnificent mentions "Green bonds" as an as-yet-not-fully-appreciated investment, I have some idea of what he does for a living.
And it ain't being a counter jumper for the Weapon Shops of Isher.
Yes, the very first thing I turn to in the event of a global financial meltdown is a portfolio stuffed with green bonds..
Why not? You have to burn something to warm that can of beans.
It's all bullshit.
“This planet has - or rather had - a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn't the small green pieces of paper that were unhappy.”
Douglas Adams
Written before the days of zeros and ones on hard drives.
Degradation of market growth will continue until the entire economic system implodes into its own footprint. Each business quarter will report actual declines until the entirety of all economic activity ceases to operate. We are very close to that juncture right now. Baltic Dry, CAT, $1.4 quadrillion dollar derivatives universe loaded with Global systemic risk.
tick, tick, tick, tick, tick, tick, tick, Z O M B I E
E M P I R E.
"...the acceleration of innovation cycles...." WTF does that mean?
lol, sounds smart, we should probably "invest" with them.
pods
This probably won't end until money printers i.e. financial rapists are either jailed or worse.
Jailed or Better.
FIFY
Can't come soon enough. Year after year i hear this. I'll be dead and gone and broke before. killing me.
In ten years or so when the DOW is trading through 100,000 and GLD has been delisted they will still be posting articles like this.
bring it http://www.bbc.com/news/uk-34741434
"Although the yuan is not a safe haven, it may be the right time to invest in the Chinese currency. It is well-placed to grow in popularity and become stronger."
"The three biggest trends for investors are related to changing global demographics, low economic growth and climate change."
"It is a very challenging time for investors because financial markets have never been so much influenced by central banks but plenty of investment opportunities exist in the new economy."
Who the hell is this guy trying to fool? Saxobank's Dembik Christopher (via the trading floor) obviously has had someone mix Flakka into his cocaine.
Pull all your assets out of the fire, because deflation is coming up hard and strong. The best deals are six months to a year away, and they've nothing to do with the Yuan, the global warming cult of madness or all the widely overblown and over-hyped demographic opportunities. (Old people get old and die. There's no opportunity there, because it's a deadend market.)
The very best deals are about looking where the stressed credit paradigm is causing so many bankruptcies, there suddenly will become an opening for new young entrepreneurs to step in and fill the vacated market niche in a clever, low-overhead, non-leveraged way.
Think like a Scot, and less like an undertaker or a Christopher Columbus trying to find the Far East. Oh, and tell Al Gore, I put my studded snow tires on the wife's car today. I'm no fool.
Inevitable? Not really. There is one solution. Injecting the wealth of the Rothschild family back into the system. 400 trillion dollars is just the exact amount. Grab the gold, destroy paper gold, jack the price up to what it should be based on supply/demand, mint some coin and begin distribution. Send a hundred men into destitution rather than 3 billion innocent people.
just add a couple million moderate muslim "refugees"
When the global banks are still propped to hang on to their inventory of dynamites (derivatives), this guy thinks that there are many fools left to buy snake oils eg the green bonds, etc. Try harder, the game in selling to CBs what they want by an increasing breed of insiders has not exhausted. Yes, the pardigm is shifting by winning mandates from the Oiligarchs to preserve wealth not in papers but neither in goods and services in places filled with the Aged and Indebted Consumers.
It is not impossible to avert a global crisis. It is just unlikely.
There are many hard working people trying to find the new technology that will increase productivity and GDP. Technology and productivity are the only saviors.
Yeah yeah. There will be a crisis in the coming years. In the next 2, 5, maybe 10 years. My toe could have made that forecast. No way I won't make money out of it.
And in the meantime, we'll pretend the ZH portfolio (long GC short S&P 500) is not 143% negative since the June 18th 2009.
The morons who do NOT understand hyperinflation, should have their "economist" titles stripped away from them.
In every single case of hyperinflation, it has been a political decision requiring that the money ends up in the hands of the people using it (i.e. helicopter drops).
NIRP is not helicopter money. Buying ETFs and govbonds is not the same. That only helps to fuel the speculative fire that benefits the 0.1% of the world's richest.
That has NEVER EVER lead to hyperinflation. How could it even theory do that?
If you and almost everybody else is broke, can't consume, can't spend, the future is looking bleak, can't get credit lines and prices are falling, how does that end up in hyper-inflation?
No, the morons at Saxobank need to study Berhnolz's 'Monetary Regimes and Inflation' and understand what hyperinflation actually is and how it comes about
What we have in cards is Delflation. The biggest bugaboo of the central bankers, that they have woved to stop, but ultimately cannot prevent. This means - of course - both debt and monetary speed/aggregate deflation. That's in the cards. Only a person who doesn't understand a single iota of systems thining can't see that.