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A crisis that all but the blinkered can see

Published Monday, January 18th, 2016

We have a crisis on our hands. Call it financial crisis, an economic crisis, a political crisis or a crisis of confidence. Call it whatever you want or all four, but it is something our financial and political leaders are still reluctant to admit. It is there for all to see who are willing to open their eyes, recession and deflation are back to haunt us. There is nothing to be optimistic about. Blame China, blame the Fed, blame commodity oversupply, blame the eurozone, Russia, Brazil, QE, austerity, an aging population, low productivity, terrorism, geopolitical tensions or social media. Blame whoever or whatever you want, what is relevant now is what is be done?

How can this be the man in the street will be asking. You are telling me that after all that austerity, all that QE, all those years of low interest rates and all those promises of imminent recovery that we are now at risk of another crisis and falling living standards? Do you guys really know what you are doing, because it seems pretty obvious now that you do not. You are just a bunch of optimists, wishful thinkers and tinkerers with a good line in spin, but basically incompetent.

These are very dangerous times. When trust and confidence is lost political change is not far behind. Week one of the New Year was alarming, week two has doubled up on that alarm. The commodity price collapse has morphed into a full blown crisis that threatens the solvency of countries, companies large and small and the lenders who have underwritten their loans. As many of these countries are ’emergers’, whose debt burdens have exploded since 2008 of which at least 50% is denominated in foreign currencies, the world has moved into the third leg of a financial crisis that continues to simmer. It began with sub-prime in the US, moved onto the eurozone and is now enveloping emerging markets, with debt in one form or another the common denominator.

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Posted by David Hufton