CHINA is set to plunge the world into an economic crisis sending stock markets crashing by 75 per cent - with devastating consequences for the US and UK, a leading city expert has warned.
By Lana Clements
The sinking value of the Chinese currency is already crippling British industry as it can’t compete with China’s cheap exports.
Other Western nations are also feeling the strain.
And with even more to come experts have predicted an 'ice age' for the world’s economies – including Britain’s.
Global deflation is going to wipe around 75 per cent in value off the American S&P stock market, as western firms will be unable to compete with cheap Chinese exports, according to analyst Albert Edwards from french bank Societe Generale.
He gave the stark warning in an investment note to clients.
And he blamed the upcoming 'carnage' on American central bank (the Fed) and its British and European counterparts for inflating prices in the first place.
American Quantitative Easing (QE) - injecting extra money into the financial system - has pushed up global asset prices, teeing up a disastrous fall, Mr Edward believes.
He said: "Investors are coming to terms with what a Chinese renminbi devaluation means for Western markets.
"It means global deflation and recession.
"A commodity bubble and the resultant US shale investment boom were all consequences of the Fed’s QE.
"The illusion of prosperity is shattered as boom now turns to bust.
"But I do hope this time around the Queen won’t ask, as she did in November 2008, why nobody saw this coming!"
Pumping extra money into the economy was reaction to the 2008 crisis that was also followed by the Bank of England and European Central Bank - essentially creating millions of pounds of extra money to buy bonds and other financial assets, pushing up prices.
Mr Edwards said: "I believe the Fed and its promiscuous fraternity of central banks have created the conditions for another debacle every bit as large as the 2008 Global Financial Crisis.
"I believe the events we now see unfolding will drive us back into global recession."
In reference to the central banks, he said: "Why can't these incompetents understand that they are, once again, the midwife to yet another global unfolding economic crisis?
"But unlike 2007, this time around the US and Europe sit on the precipice of outright deflation.
"Indeed, it is all around us. But don’t expect the central bankers to comprehend the hole they now find themselves in."
The analyst said the western service sectors won't be able to withstand the pressure from Chinese deflation.
He said: "When an economy is hurtling towards recession it is almost always the manufacturing sector that takes the less volatile services sector by the hand and leads it into a recessionary underworld."
The situation is bound to be a catastrophe for people and the economy, according to Mr Edwards.
The banker is an outspoken pessimist on the global economy, but his fears have been echoed by other leading figures.
Legendary investor George Soros has also said the Chinese crisis is set to plunge the world into another economic depression.
And this week RBS urged clients to 'sell everything' as commodity and share prices are set to plunge.
Societe Generale seconds RBS doomsday prophecy and predicts collapse of the eurozone
By Kedar Grandhi
January 16, 2016 "Information Clearing House" - "IBT" - Albert Edwards, a strategist at Société Générale bank, has warned of an impending global financial crisis similar to the one that occurred in 2008-09. This time, he said, it could lead to the collapse of the eurozone.
The warning follows a recent note issued by analysts at Royal Bank of Scotland (RBS) to investors to "sell everything" ahead of an imminent stock market crash. It also comes at a time when global markets see a short period of relief from the bearish trend that commenced since the New YEar.
At an investment conference in London, Edwards said: "Developments in the global economy will push the US back into recession. The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed. Can it get any worse? Of course it can."
He explained that while value of currencies in emerging markets was on the decline, the appreciation of the US dollar was crushing the corporate sector and that the credit expansion in the country was not for real economic activity, but was borrowings to finance share buybacks.
Edwards stressed that the US economy was in far worse shape than what the US Federal Reserve had realised and that America's central bank had failed to learn the lessons of the housing bubble that led to the financial crisis and slump in 2008-09. "They didn't understand the system then and they don't understand how they are screwing up again. Deflation is upon us and the central banks can't see it," he said.
The Soci̩t̩ G̩n̩rale strategist compared US with Japan and said that the dollar had risen by as much as the Japanese yen in the 1990s Рa move which had then put Japan into deflation and caused solvency problems for banks in the Asian country, according to The Guardian.
Regarding the euro, he said that efforts by the European Central Bank to push for growth and lower the euro would not matter in the event of a fresh downturn. "If the global economy goes back into recession, it is curtains for the eurozone," he said.
Rising unemployment that would be associated with another recession would not be accepted by countries such as France, Spain and Italy. "What a disaster the euro has been: it is a doomsday machine in favour of the German economy," Edwards claimed.
He also said that the declining demand for credit in China was another sign of the crisis to come. "That happens when people lose confidence that policymakers know what they are doing. This is what is going to happen in Europe and the US."
See also
China opens AIIB, sends chills to US: China on Saturday officially launched the Asian Infrastructure Investment Bank (AIIB) which is seen as an emerging rival to powerful Western-led financial institutions such as the World Bank, the Asian Development Bank and the International Monetary Fund.
China’s Capital Flight: Money is pouring out of China as rapidly as it once poured in. That’s a dilemma for Xi Jinping.
Oil Bust Could End Dollar Domination: The US dollar survived the collapse of Bretton Woods in the ‘70s because its use in crude oil transactions made it the king of reserve currencies, but can it survive a collapse of petro dollars? Can the world survive the catastrophic geopolitical consequences that would follow?
By Lana Clements
The sinking value of the Chinese currency is already crippling British industry as it can’t compete with China’s cheap exports.
Other Western nations are also feeling the strain.
And with even more to come experts have predicted an 'ice age' for the world’s economies – including Britain’s.
Global deflation is going to wipe around 75 per cent in value off the American S&P stock market, as western firms will be unable to compete with cheap Chinese exports, according to analyst Albert Edwards from french bank Societe Generale.
He gave the stark warning in an investment note to clients.
And he blamed the upcoming 'carnage' on American central bank (the Fed) and its British and European counterparts for inflating prices in the first place.
American Quantitative Easing (QE) - injecting extra money into the financial system - has pushed up global asset prices, teeing up a disastrous fall, Mr Edward believes.
He said: "Investors are coming to terms with what a Chinese renminbi devaluation means for Western markets.
"It means global deflation and recession.
"A commodity bubble and the resultant US shale investment boom were all consequences of the Fed’s QE.
"The illusion of prosperity is shattered as boom now turns to bust.
"But I do hope this time around the Queen won’t ask, as she did in November 2008, why nobody saw this coming!"
Pumping extra money into the economy was reaction to the 2008 crisis that was also followed by the Bank of England and European Central Bank - essentially creating millions of pounds of extra money to buy bonds and other financial assets, pushing up prices.
Mr Edwards said: "I believe the Fed and its promiscuous fraternity of central banks have created the conditions for another debacle every bit as large as the 2008 Global Financial Crisis.
"I believe the events we now see unfolding will drive us back into global recession."
In reference to the central banks, he said: "Why can't these incompetents understand that they are, once again, the midwife to yet another global unfolding economic crisis?
"But unlike 2007, this time around the US and Europe sit on the precipice of outright deflation.
"Indeed, it is all around us. But don’t expect the central bankers to comprehend the hole they now find themselves in."
The analyst said the western service sectors won't be able to withstand the pressure from Chinese deflation.
He said: "When an economy is hurtling towards recession it is almost always the manufacturing sector that takes the less volatile services sector by the hand and leads it into a recessionary underworld."
The situation is bound to be a catastrophe for people and the economy, according to Mr Edwards.
The banker is an outspoken pessimist on the global economy, but his fears have been echoed by other leading figures.
Legendary investor George Soros has also said the Chinese crisis is set to plunge the world into another economic depression.
And this week RBS urged clients to 'sell everything' as commodity and share prices are set to plunge.
Societe Generale seconds RBS doomsday prophecy and predicts collapse of the eurozone
By Kedar Grandhi
January 16, 2016 "Information Clearing House" - "IBT" - Albert Edwards, a strategist at Société Générale bank, has warned of an impending global financial crisis similar to the one that occurred in 2008-09. This time, he said, it could lead to the collapse of the eurozone.
The warning follows a recent note issued by analysts at Royal Bank of Scotland (RBS) to investors to "sell everything" ahead of an imminent stock market crash. It also comes at a time when global markets see a short period of relief from the bearish trend that commenced since the New YEar.
At an investment conference in London, Edwards said: "Developments in the global economy will push the US back into recession. The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed. Can it get any worse? Of course it can."
He explained that while value of currencies in emerging markets was on the decline, the appreciation of the US dollar was crushing the corporate sector and that the credit expansion in the country was not for real economic activity, but was borrowings to finance share buybacks.
Edwards stressed that the US economy was in far worse shape than what the US Federal Reserve had realised and that America's central bank had failed to learn the lessons of the housing bubble that led to the financial crisis and slump in 2008-09. "They didn't understand the system then and they don't understand how they are screwing up again. Deflation is upon us and the central banks can't see it," he said.
The Soci̩t̩ G̩n̩rale strategist compared US with Japan and said that the dollar had risen by as much as the Japanese yen in the 1990s Рa move which had then put Japan into deflation and caused solvency problems for banks in the Asian country, according to The Guardian.
Regarding the euro, he said that efforts by the European Central Bank to push for growth and lower the euro would not matter in the event of a fresh downturn. "If the global economy goes back into recession, it is curtains for the eurozone," he said.
Rising unemployment that would be associated with another recession would not be accepted by countries such as France, Spain and Italy. "What a disaster the euro has been: it is a doomsday machine in favour of the German economy," Edwards claimed.
He also said that the declining demand for credit in China was another sign of the crisis to come. "That happens when people lose confidence that policymakers know what they are doing. This is what is going to happen in Europe and the US."
See also
China opens AIIB, sends chills to US: China on Saturday officially launched the Asian Infrastructure Investment Bank (AIIB) which is seen as an emerging rival to powerful Western-led financial institutions such as the World Bank, the Asian Development Bank and the International Monetary Fund.
China’s Capital Flight: Money is pouring out of China as rapidly as it once poured in. That’s a dilemma for Xi Jinping.
Oil Bust Could End Dollar Domination: The US dollar survived the collapse of Bretton Woods in the ‘70s because its use in crude oil transactions made it the king of reserve currencies, but can it survive a collapse of petro dollars? Can the world survive the catastrophic geopolitical consequences that would follow?
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