Leading Economist Warns of Hellish Future For Global Economy

July 11th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 

 

He predicted the 2007-09 Global Financial Crisis with uncanny accuracy, even while experts including then Federal Reserve chairman Ben Bernanke were dismissive of him. He’s Nouriel Roubini, economics professor at NYU and a highly distinguished economist. Though his correct forecast of the 2007-09 financial implosion earned him the nickname of Dr. Doom, he prefers to think of himself as Dr. Realist. His latest exercise in realism makes chilling reading.

As the Covid pandemic erupted, Roubini was already warning that the world faced a global economic depression sometime during the course of the present decade. With unprecedented sovereign debt expansion during the past year  unleashed by governments under the guise of providing Covid relief, Professor Roubini has taken a fresh look at the data, and published his conclusions in a recent article that appeared in The Guardian.

“Conditions are ripe for repeat of 1970s stagflation and 2008 debt crisis,” reads the headline of Roubini’s article.  “Warning signs are there for global economy, and central banks will be left in impossible position,” he writes.
In essence, Roubini points out that current trends, which include not only the massive expansion  of sovereign debt but also contributing  factors such as the loss of independence by central banks coupled with the decoupling between the United States and China, leading to fragmentation of global supply chains, point to an unavoidable train wreck  for the global economy. It is a hellish forecast, which unfortunately has the ring of truth.  If Professor Roubini’s forecast is as accurate as was his previous warning of the impending Global Financial Crisis of 2007-09, the world stands on the verge of the Global Economic Crisis of the 21st century, a Great Depression 2.0 coupled with high inflation. And, as Roubini warns, central banks  will be powerless to stop it.

Global Food Inflation Is Soaring Through The Roof

June 7th, 2021 Comments off

According to the United Nations, its UN Food Price Index indicates, on a year to year basis, a rise of nearly 40 percent. This rate of increase in the price of the single most important basket of commodities critical for sustaining human life clearly contradicts official government statistics throughout the world, seeking to reassure their publics that the unprecedented level of public indebtedness accumulated by sovereigns over the past year has at worst only led to a slight uptick in the inflation rate, and only temporarily.

 

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 

Consumers shopping for food know the truth. A friend residing in the U.S. recently shared with me the dismaying news that the price of watermelon has risen to $12.00, a price point which only a year ago would have seemed imaginary. This dangerous price spiral is an inevitable outcome of the unprecedented government borrowing in the name of fighting a pandemic, coupled with Covid-induced disruptions to the global supply chain.

The noted economic historian Adam Tooze notes that the last time such staggering levels of food price inflation occurred was in 2011. As he observes, this enabled the Arab spring, and all its subsequent geopolitical destabilization.

Inflation Risks Rise Sharply In Latest CPI Data

May 12th, 2021 Comments off

The U.S. Bureau Of Labor Statistics has released its April figures, and they have surprised analysts. They show a CPI rise of 0.8 %, , far higher than expected. In the past twelve months, inflation in the United Sates stood at 4.2%, and is clearly accelerating. As many observers note, even this worrying data understates many price increases more reflective of what is impacting the typical American consumer.

This blog has warned previously of the growing threat of inflation and eventually stagflation-high inflation in conjunction with a severe  inflation. At present, inflationary pressure not only in the U.S. but globally are rising. In the case of America, there are a number of volatile factors accelerating inflationary pressure in the U.S. economy. The trillions of dollars in new public debt accumulated in only one year since the outbreak of Covid has overloaded the economy with monetary stimulus, creating a highly inflationary dynamic. The pandemic and public policy responses have

Sheldon Filger-blogger for GlobalEconomicCrisis.com

also added to the inflationary matrix. Then there are the unexpected but increasingly more common cyber attacks, a growing geopolitical reality.

The recent cyber attack on a critical oil pipeline in the U.S. has generated economic shockwaves, leading to gas shortages, long lines at gasoline stations and double-digit price rises. The response of the Biden administration: It is strictly a private sector decision on whether or not the company pays ransom to the hackers, and the government has no official position on the matter.

The example above does not leave grounds for optimism. The impotence of Washington D.D, is itself a contributing factor to inflation. Investors are already beginning to anticipate an eventual end to the near zero-interest policies of the Federal Reserve.

Three Underreported Trends Pointing To Grave Global Economic Crisis

May 3rd, 2021 Comments off

Pundits are already praising President Biden’s debt-fed economic boom through vast levels of public indebtedness, which add a few temporary percentage points to the U.S. GDP, while the Eurozone has slipped back into recession. Far more telling  are three interconnected economic trends, recognized by economists and sophisticated entrepreneurs, but largely ignored in the popular media. These trends are:

 

  1. Global microchip shortage. The Covid pandemic both increased the demand for high technology cyberspace platforms , while disrupting supply chains on which the worldwide fabrication of computer chips depends. And not only cyber platforms; many manufacturing  processes and end-products, such as the automotive industry, depend on microchips. In the wake of the chip drought, factories across the globe have been forced to close down, adding to the unemployment rolls.

2.Explosive speculation in Bitcoin. Economic history knows many cases of speculative bubbles, such as the tulip bulb craze that occurred several hundred years ago. More recently, financially engineered sub-prime mortgage investment packages brought about the Global Financial Crisis of 2007-09. That most recent episode, however, pales in the speculative hysteria that has been a characteristic of cyber currency  in general, and in particular Bitcoin. The explosive  growth of this cyber “currency,” created out of thin air by an anonymous individual known only by a pseudonym, with archaic blockchain technology and cyber “mining” expending vast amounts of carbon-derived energy for an opaque, semi-mystical process,  confounds all reason. Trillions of dollars appear to be pouring into this speculative investments like sharks drawn by blood to a feeding frenzy.  Unless the global economy has been transformed into a metaphysical realm, this cannot end well. When the bubble pops, the collateral damage to the world’s economy and financial system will be beyond catastrophic.

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 

 3, Increasing tensions both between countries, and within nation-states. This phenomenon afflicts most countries,  large and small, but particularly the U.S. and Russia. In the case of Putin’s Russia, Moscow’s relations with her  neighbors and the United States  are at their worst since the peak of the Cold War, while internally the regime’s suppression of dissent has only further distanced a growing proportion of the citizenry from the government. In particular, anecdotal evidence points to a major proportion of Russia’s youth, especially university students , having lost trust in the government and preferring to emigrate. These trends, however, are not unique to Russia.  What this portends to is the likelihood that countries will actually seek external conflict as a means to facilitate national unity domestically.

The above three trends all point to elevated risks of stagflation; high inflation and recessionary economics.  These in turn are likely to further exacerbate internal and external conflicts across the globe.

Biden Administration Posts Record Deficit of $660 Billion In March

April 13th, 2021 Comments off

 

 

In March 2020 the U.S. Federal Government posted a deficit of $119 billion, reflecting the already profligate spending of Washington pre-pandemic. One year later, with President Biden going literally for broke, Covid related federal spending  pushed government outlays to $927 billion, with receipts of only $268 billion, leaving a record deficit for March 2021 of $ 660 billion.

Not during Franklin Roosevelt’s Great Depression era  New Deal program, or the massive stimulus budget of the Obama administration in the wake of the Global financial Crisis has there been such dizzying levels of federal spending. The  deficits incurred by Washington are fully matched by state governments, as well as sovereigns throughout the world.

Despite the record  price levels on equity markets and particularly on Wall Street, there are worrying signs of approaching inflation. As this blog has warned before, significantly higher rates of inflation will compel the Federal Reserve to abandon its near-zero interest rate policy. Once interest rates rise to anything approaching normal levels, debt serving costs for Washington will balloon to an unsustainable level.

Sheldon Filger-blogger for GlobalEconomicCrisis.com

President Biden After Two Months: Rapidly Rising Sovereign Debt & International Tensions

March 19th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

The supposed raison d’être of the Biden presidency was defined by its political allies and media supporters as  a “return to normality” after the 4-year administration of former president and major-league disruptor Donald Trump.  Now that the Biden administration has been in office for 2-months. what is the  scorecard?

Problematic, for 3 major reasons, all interconnected:

 

  1. Unprecedented rise in the national debt The passage of the latest Covid relief bill, following in the wake of earlier bills Congress approved during the last months of the Trump administration, have skyrocketed the U.S. national debt at a level never before seen. The stimulus package approved during the Obama-Biden administration following the Global Financial Crisis of 2007-09 is trivial in comparison. The latest package adds $1.9 trillion to the already staggering growth in the nation’s sovereign debt during the course of a single year. Defenders of the Biden administration claim that there should be no concern. Other indicators provide a different answer. Rising 10-year bond yields, the growing disconnect between Wall Street and Main Street and other factors point to a growth of future inflationary trends and expectations. Should inflation become realized at  higher rates than the past 15 years. the growth in debt servicing costs for the U.S. Treasury may break the U.S. Federal Budget in future years.
  2. Breakdown of control on the Southern border. The Biden administration has undone most of his predecessor’s border control policies. The result is a rise in massive, uncontrolled immigration from impoverished and violence-stricken Latin American countries, outside the legal process. This development has the potential to promote domestic instability in a country already stricken with a partisan divide characterized by growing mutual hostility.

3.Worsening international relations. In particular, President Biden  and his policymakers and advisors have exacerbated the already inharmonious relations that existed between Washington and its  two major global adversaries; Russia and China. The most recent  example was President Biden’s public comment that Putin was a “killer.” This needlessly hostile name-calling directed at the head of state of a major power possessing a nuclear arsenal equal to that of the U.S. was stunning. The supposedly more polished and experienced Biden, often contrasted as such with Trump, engaged in the type of  verbal insults and bullying expected at a schoolyard scrap, not from mature and professional policymakers. That such amateurish behavior has already occurred so early in the Biden presidency points to the likelihood of a worsening of bilateral relations between the U.S. and Russia, and probably a similar trend with China.

The above three factors are interconnected. They  points  to the United States, under the auspices of the Biden administration, engaging  in policies that are fiscally, domestically and geopolitically highly destabilizing. This makes a global economic depression a far more likely event in the near future.

Massive Distortion In Global Economy and Rise of Bitcoin Valuation: Signs of Impending Economic Disaster?

February 16th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

An unprecedented wave of policy measures has enabled distortions that  are wreaking havoc in the global economy, creating accelerating dangers of a cataclysmic event. This can be in the form of a market crash, contagion from imploding asset bubbles or rise in fears of inflation leading to irrational money flows. A combination of all these forces in synchronicity can be the single event leading to a global depression.

The major factor in the global economy at present is the unprecedented wave of liquidity being unleashed by policy makers. That fact alone is what has driven the sharp rise in equity prices since the initial collapse in the wake of Covid-induced economic shutdowns. There is no other explanation for the massive rise in equity prices, even while the real economy is stagnant after a sharp decline  in the wake of the coronavirus pandemic. The divide between Main Street and Wall Street alongside the sharp rise in equities has never been wider. It is only due to the money printing of central banks and record levels of public debt caused by the fiscal policies of sovereigns that has brought about this phenomenon.

Alongside the sharp rise in equity prices has been the explosive price rise in Bitcoin. The emergence of crypto or digital currencies in general, and Bitcoin in particular, has brought about the most expansive speculative bubble in the modern financial era. Bitcoin is completely opaque; nobody even knows the true identity of the person who created this cyber currency. Yet, even Tesla among other companies has begun to invest substantially in this digital currency as a means of mitigating risk factors.

Meanwhile, bond yields have begun to rise, an indication of growing fears of inflation. That, and the continuing deluge of liquidity from the policymakers, has created perhaps the most distorted and unstable financial environments since the  period that preceded the Great Depression of the 1930s.

Growing Concern Among Veteran Investors At Stock Market Bubble That Will Burst With Catastrophic Effect

January 25th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

When Covid-19 first impacted major economies last Spring, stock markets throughout the world plunged  by double-digits in a period of only 3-weeks. Yet, not only have these losses all been recouped; less than a year later equities have reached record levels, led by the Dow Jones index. In addition, other speculative investments such as the cyber currency Bitcoin have soared to dizzying highs. Yet, amid this financial exuberance veteran investors are displaying growing concern for the future. The  Financial Times has characterized their concern as seeing  “a bubble to rival anything  seen in the past century.”

Simply put , there is a disconnect between the equity markets and  the real economy, which is in dire straits in virtually every country. The sole reason for the escalation in equity prices is the unprecedented money printing by central banks, combined with equally unparalleled deficit spending by sovereigns. It is only this monetary and financial sugar high which is driving soaring equity prices.

When the first hint occurs that the pump-priming may be receding, however, the investors will run for the exists. What is likely to occur is a global stock market crash of calamitous proportions which, like the 1929   crash on Wall Street, will usher in a period of deep economic depression.

U.S. Economy: Job Losses Amid Growing Political Instability

January 9th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

The Labor Department released its jobs reports for December 2020. It is dismal yet not surprising. In the past month the U.S. shed 140,00 jobs. This is the first monthly contraction  in  employment numbers  since April 2020, and the destruction of millions of jobs in the early stages of the Covid-19  pandemic. Though vaccines are slowly being distributed in the United States, having been developed in record time, the nation is currently experiencing the most severe spread of coronavirus, with states responding with further lockdowns and restrictions on economic activity. This portends to further job losses as the Biden administration takes over the White House in a matter of days.

It is not only the Covid-19 contagion that is damaging  the American economy. The risk assessment consultancy Eurasia Group lists political division in the United States as the number one global risk, ahead of the Covid pandemic. As if on cue, 48 hours after the release of Eurasia Group’s, report  on top global risks, riots erupted within  the Capitol building in Washington DC.  The growing political stratification within American society, combined with the continuing damaging impact of Covid on economic  activity, points to a very negative economic outlook for the United States and inevitably for the entire global economy.

 

China To Become World’s Largest Economy by 2028 According To Leading Economic Forecasting Firm

December 27th, 2020 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

The  Center For Economics  and Business Research (CEBR), a UK based consultancy firm, has issued a new forecast that projects China’s GDP will surpass that of the United States by 2028, making China the largest economy in the world. This  projection is five years earlier than an earlier forecast, pointing to an  accelerating decline in U.S. economic strength relative to that of the People’s Republic of China.

According to the CEBR, the primary driver in the imminent surpassing of America’s GDP by China is the impact of Covid-19. The coronavirus pandemic has impacted the U.S. more than any other national economy,  creating massive financial losses, major economic dislocation  and political instability that also retards future economic growth. In contrast, though the pandemic originated in the Chinese city of Wuhan, the draconian measures adopted by Beijing led in the long-term to less economic damage. The relatively low rate of Covid infections in China over the past several months has enabled America’s primary economic competitor to return to growth, while the United States in mired in a patchwork of intermittent and inconsistent lockdowns, while infection rates and  mortality are at a peak.

The fact that China is now projected to have the largest GDP in the world by 2028 will have significant geopolitical consequences, as well  as determine which country will have the most impact on the global economy. Thus far, there are no signs that political leaders in either the U.S., Europe or Russia have fully comprehend the seismic shift in economic power that is occurring virtually in real time, largely enabled by a global pandemic that ironically originated  in China.