The day is finally here: the economic collapse is admitted.
There have been plenty of people warning of the perils ahead in the financial world. Of the inevitable crash of the system, and the terribly unstable factors that were coming together in a perfect storm.
Their experts are now pointing to a triangulation of collapsing oil prices, recession and equity. There are other key factors, too, but all will combine to create a devastating climate for the American people. Indeed, the crisis would be felt globally as well.
The global economy seems trapped in a “death spiral” that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi strategists have warned.
“The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said.
“Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)… and repeat. Ad infinitum, this would lead to Oilmageddon, a ‘significant and synchronized’ global recession and a proper modern-day equity bear market.”
“The death spiral is in nobody’s interest. Rational behavior, most likely, will prevail,” he said in the report.
Crude oil prices have tumbled by around 70 percent since the middle of 2014, during which time the U.S. dollar has risen by around 20 percent against a basket of currencies.
The geopolitical scene is one of a world decoupling from the petrodollar. An oil price war is underway as key players battle out for the world order scenario when the prices reach the bottom, and new normals take hold among global currencies.
The stronger dollar issue is making it difficult for foreign borrowers to repay loans at a time when rates are yanked up slightly, and there is pressure to make due. A debt bomb may well go off.
Goldman Sachs recently predicted that the coming recession would really be the “third wave” of the financial crisis, building upon the destruction of the 2008 banking collapse and subsequent rounds of sovereign-debt crisis in Europe (Greece, etc.) in 2012:
This wave is characterised by rock-bottom commodities prices, stalling growth in China and other emerging-markets economies, and low global inflation, Goldman Sachs analysts [stated]…
This triple whammy has its roots in the response to the first two waves of crisis — the banking collapse and European sovereign-debt crisis — and it is all part of the so-called debt supercycle of the past few decades.
Now that interest rates are looking as if they might go up, lenders are heading for the exits and investors are pulling out of commodities, which are closely linked to the fate of the emerging economies.
Quantitative easing has stretched it out very thin, and with realities setting in and coming home to roost, it is painful to see how fragile the state of the world has become.
The executives on Wall Street will mostly all walk away with fresh earnings looted from those who were squeezed.
There are going to be a lot of people losing everything when this all explodes.