HSBC warns about the next recession. “The world economy is like a ship without lifeboats”


ship without lifeboatsHSBC chief economist Stephen King is already thinking about the next recession.

In a note to clients Wednesday, he warns: “The world economy is like an ocean liner without lifeboats. If another recession hits, it could be a truly titanic struggle for policymakers.”

Here’s King (emphasis added):

Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.

King notes that this far into the recovery, there’s a lack of “traditional policy ammunition.” For instance, Treasury yields have not risen, the budget deficit is not falling, and welfare payments are still on the rise.

As for what might trigger the next recession, King highlighted four things:

Wage growth will hurt corporate earnings and reduce the share of corporate profit contributing to US gross domestic product (it also doesn’t help that worker productivity is low). In turn, households and businesses will lose confidence in the economy, and the “equity bubble” will burst with collapsing stock prices.

Nonbank financial systems such as insurance companies and pension funds will increasingly not be able to meet future obligations. This will cause a huge demand for liquid assets, forcing people to rush to sell despite no matching demand, triggering a recession.

Forces beyond the Federal Reserve’s control, including the possibility that China’s economy and its currency could collapse. Weak commodity prices could also cause collapses in several emerging markets, as could continued strength in the US dollar.

The Fed could cause the next recession by raising interest rates too soon, repeating the mistakes of the European Central Bank in 2011 and the Bank of Japan in 2000.
Business insider



8 responses to “HSBC warns about the next recession. “The world economy is like a ship without lifeboats””

  1. 5thDrawer Avatar

    60 Million Refugees ….. Main Reason.

      1. 5thDrawer Avatar

        One can say a truth … and back it up … and still not have it heard.
        If there are no ‘charges’, but the back-tax is collected, at least something good may come from it’s being done. And a future changes.

        1. Hend Abyad Avatar
          Hend Abyad

          They can’t charge Monsanto either,mafia has power over congress, the justice, HSBC has Rothschild’s money. .they have more power than the government. enough of this.

          I have an old friend a Kopt from Alexandria, professor at the university, i was jealous when he left two weeks ago (for academic work) in Lebanon, it was 10degres here. I met him we invited him at one of my cousins house, it’s sooo different here..they don’t talk about the weather, only politics.:))..
          As soon as the plane descends i get theses tears..

  2. Another earthquake in Nepal, the death toll grows

  3. 5thDrawer Avatar

    Chinese ‘warnings’ don’t help things much … are we importing these now???

  4. China has increased direct investments abroad by 36 percent

  5. On the Swedish Stock Exchange started trading in the world’s first asset-based Bitcoin

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