Chorus of Economic Warnings Escalates

The chorus of warnings across the globe of a pending economic recession continue to grow.  The IMF, fresh after their recent (yet again) global growth downgrade, have stated in their financial stability report that “Shocks may originate in advanced or emerging markets and, combined with unaddressed system vulnerabilities, could lead to a global asset market disruption and a sudden drying up of market liquidity in many asset classes.”  Importantly too they stated this doesn’t rely on ‘extreme assumptions’ – i.e. something(s) small could be enough to tip us in to the next financial meltdown.  Just remember it was the sudden liquidity squeeze that saw the GFC unfold and only desperate Government liquidity injection that stopped it from completely unravelling.  They had many more ‘bullets in the gun’ then…

BIS (the central banks’ central bank) continue their warnings again now warning of “major fault lines” in the global financial system due to the debt glut off low interest rates.  (Coincidentally, the US Treasury just quietly updated their consolidated debt position, up another $2.7t to $62.7t, or 350% of US GDP!).

Bank of America have now also warned us to prepare for a “massive policy shift in 2016” with the failure of artificial stimulus in the ‘west’ playing out and China going ‘all in’ on stimulus to get out of their slump combing in a dangerous cocktail that sees them expressly recommending investing in gold along with commodities, TIPs (Treasury Inflation Protected Securities) and property.  The latter may resonate overseas but coincides with concerns about an already overheated Australian property market and some predictions of price falls not rises in the Aussie context.