There is plenty of doom and gloom at Davos and it could be we are due for another cyclical piece of devastation.
Harvard professor Kenneth Rogoff said the fear in the markets stems from a dawning realisation that the Chinese authorities are not magicians after all, and that this time the Fed may stand back and let the blood-letting run its course.
“What is driving this is that the central banks are not coming to the rescue,” he said, speaking at a Fox Business event hosted by Maria Bartiromo. Rates are already zero or below in Europe and Japan, and quantitative easing is largely exhausted, leaving it unclear what they could do next if the situation deteriorates.
The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.
“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” said William White, the Swiss-based chairman of the OECD's review committee and former chief economist of the Bank for International Settlements
I thought we had been told after we had all bailed the bankers out of their self induced economic crisis that things would be put right. Most of us scoffed at such nonsense as the prisons remained remarkably empty of bankers.
We were told Austerity was the only way forward, now oil prices have dropped like a rock along with commodities due to flooding of the markets because demand has fallen.
Ah yes so the sacred god of Austerity may have proved a false messiah after all, now we might see the FED sit back and watch the bloodbath, perhaps we could have done that before further concentration of wealth had occurred? Perhaps we could have done that before the banks became to big to exist.
Yes, who could have ever foreseen that throttling the market with Austerity might end up leaving it without air.
Austerity was actually only for some:
Paul Singer, head of Elliott Management, said central banks have corrupted global assets markets with $15 trillion of bond and equity purchases over the last seven years, creating a total dependency on monetary largesse that must inevitably be all the more painful when it ends.
The bond markets – supposedly safe – have become the epicentre of risk.
“Things could be very disorderly. There is the potential for a tectonic shift if investors lose confidence in central banks,” he said.
I thought we were meant to have dealt with this fragility, we were told the sacrifice of our public services were vital, that we could afford not to have Austerity thrust down our collective throats. Some of us just didn’t believe the crap that they were selling. What appears to have happened is that Austerity itself has made the whole house of cards less stable.
Our macroeconomic ammunition to fight downturns is essentially all used up
Some lost their pensions, some lost everything in the housing markets, some areas and cities became wastelands. The rich in the end however after initial losses, became richer than before.
Whether there is a meltdown or not, will they once again double down with Austerity?
With Iran’s sanctions now over more oil will flood into the market place, prices will drop further and the areas of growth in the global economy will slow down further mainly in the developing world.
Who will pay the bill this time, yes, you guessed correctly.
What effect could another crisis have upon the election in the US?