It’s rare that a major institution puts out bad news in such an unvarnished & direct manner…
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
“A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
The Royal Bank of Scotland is one of the major banks in Scotland, and is definitely part of the mainstream banking industry in the UK. This warning is coming from one of the big players in the global finance market, not some lone voice crying in the wilderness. If you read between the lines, you can also infer that the problems we have been seeing in earnest since last fall are just a warm-up to the real financial pain that may be coming our way.
As the article points out, the normal tools for dealing with such a problem (i.e. massive injections of liquidity a.k.a. inflation) are not as palatable an option as it used to be, since citizens are already seeing notable increases in price of such staples as food & energy. Do you jack up inflation to save the market and hammer average citizens, or do you risk the market falling apart, with major job losses, again hammering average citizens?
A major credit crisis some time in the next three months would have the fecal matter impacting the fan during the thick of the general election race here in the States. Anyone wonder what kind of effect that would have on the outcome?