‘Titanic’ Global Economy May “Collapse” Warn HSBC - Gold Is Lifeboat - By Goldcore (23/5/15) PDF Print E-mail
Goldcore   
Saturday, 23 May 2015 08:52

- “World economy is like an ocean liner without lifeboats” - HSBC
- Four areas of high risk identified by HSBC
- Risk of stock market crash
- Pension funds and insurers may not meet obligations
- Chinese recession may drag U.S. into recession or depression
- Premature rate rise would expose very fragile global economy
- “There aren’t enough lifeboats to go round”
- HSBC positive on gold due to risks
- Gold vital lifeboat when global ship strikes iceberg


The chief economist of the world’s third largest bank, HSBC’s Stephen King, has compared the global economy to the Titanic.

In a note to clients on Wednesday he wrote “We may not know what will cause the next downswing but, at this stage, we can categorically state that, in the event we hit an iceberg, there aren’t enough lifeboats to go round.”

“The world economy is like an ocean liner without lifeboats.” As we have been warning in recent months, when another recession arrives, governments do not have the ability or the reserves to prop up the economy like they did in 2008.

Global debt has soared by 40 percent since the Great Recession. We now have a staggering $200 trillion of debt globally, or almost three times the size of the global economy. It would be a “truly titanic struggle” for policymakers to right the economy, King said.



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Today’s CPI Lesson: The Fed’s 2% Inflation Target Is Completely Stupid - By David Stockman (23/5/15) PDF Print E-mail
David Stockman   
Saturday, 23 May 2015 08:51

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Shame, Shame, Shame On The Prime Minister & Leaders Of UMNO. All Of You Have Brought Shame To Malaysia - By Matthias Chang (22/5/15) PDF Print E-mail
Matthias Chang   
Friday, 22 May 2015 11:48

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Even Harvard Economists Admit Fed Policy Has "Created Dangerous Risks" - By Tyler Durden (22/5/15) PDF Print E-mail
Tyler Durden   
Friday, 22 May 2015 07:37

Zero Hedge

No lesser establishment economist than Martin Feldstein - Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research - has some warning words of wisdom for The Fed today: "...the Fed’s unconventional monetary policies have also created dangerous risks to the financial sector and the economy as a whole." When even The Ivory Tower is losing faith, you know The Fed is in trouble...

Excerpted from Project Syndicate...


But the Fed’s unconventional monetary policies have also created dangerous risks to the financial sector and the economy as a whole. The very low interest rates that now prevail have driven investors to take excessive risks in order to achieve a higher current yield on their portfolios, often to meet return obligations set by pension and insurance contracts.

This reaching for yield has driven up the prices of all long-term bonds to unsustainable levels, narrowed credit spreads on corporate bonds and emerging-market debt, raised the relative prices of commercial real estate, and pushed up the stock market’s price-earnings ratio to more than 25% higher than its historic average.

The low-interest-rate environment has also caused lenders to take extra risks in order to sustain profits. Banks and other lenders are extending credit to lower-quality borrowers, to borrowers with large quantities of existing debt, and as loans with fewer conditions on borrowers (so-called “covenant-lite loans”).



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Former Fed Governor Predicts “Wrenching” Market Adjustment - By Wolf Richter (22/5/15) PDF Print E-mail
Wolf Richter   
Friday, 22 May 2015 07:34

Wolf Street

Lawrence Lindsey, a Governor of the Federal Reserve from 1991 to 1997, was right before. And got fired for it. Reality was too inconvenient.

In December 2002, as George W. Bush’s economic adviser and Director of the National Economic Council at the White House, he fretted out loud that the invasion of Iraq would be a lot more expensive than supporters of it were claiming. Clearly he’d failed to drink the Kool-Aid. Instead of peanuts, it would cost as much as $200 billion, he said. It shook the White House at its foundations, the fact that he had the temerity to say this.

The Atlantic explains:

Bush instead stood by such advisers as Paul Wolfowitz, who said that the invasion would be largely “self-financing” via Iraq’s oil, and Andrew Natsios, who told an incredulous Ted Koppel that the war’s total cost to the American taxpayer would be no more than $1.7 billion.

As it turns out, Lawrence Lindsey’s estimate was indeed off — by a factor of 10 or more, on the low side.

So maybe people should listen to him. And maybe, if his record repeats itself, the disaster he warns about is going to be a lot more costly in the end than the worst-case scenario he is now predicting.



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