Global Financial Crisis 2.0 - 2023 Edition

[noobcarbuyer]

https://finance.yahoo.com/news/major-hedge-fund-just-warned-175120507.html

A major hedge fund just warned that hyperinflation could lead to ‘global societal collapse’—and it blames the central bank

The world’s worst financial crisis in decades may be right on our doorstep.

Rising inflation and the largest interest rate hikes globally in two decades have set the stage for the biggest economic upheaval since World War II, according to Elliott Management, a major hedge fund that manages nearly $56 billion in assets.

A unique and “extraordinary” set of economic conditions is steering the globe toward a crisis worse than any of the stock market crashes or energy shocks of the past 70 years, Elliott warned in a recent letter to clients, the Financial Times reported Wednesday.

The letter acknowledged, however, that the dire situation isn’t guaranteed. But some degree of economic downturn beginning next year is looking increasingly likely as central banks, including the U.S. Federal Reserve, have responded to rising inflation with aggressive interest rate hikes that international institutions including the World Bank and the UN have warned could trigger a global recession.

But the outcome could be even worse than that, according to Elliott, which claimed central banks sparked the inflation crisis when they loosened monetary policy in the early days of the COVID-19 pandemic.

The result of this looming economic spiral could even lead to “global societal collapse and civil or international strife,” according to Elliott.

Elliott declined Fortune’s request for comment.

Central banks in the spotlight

In its letter, Elliott accused policymakers of being “dishonest” about the real cause behind rising inflation, and of not taking responsibility for the part central banks played in creating it.

In 2020, many central banks—including the Fed, the U.K.’s Bank of England, and the European Central Bank—all lowered their interest rates to record lows of near-zero in an attempt to spur growth, after interest rates had already spent a decade at historical lows following the 2008 financial crisis.

That ultra-loose monetary policy countered the economic drag created by stay-at-home orders and business closures. But interest rates staying too low for too long can create additional economic risks if they ignite excessive growth and uncontrolled inflation.

The long-term consequence of the low-rate era could set the world on a “path to hyperinflation,” Elliott wrote, a rate of inflation that is rapid, self-sustaining, and largely uncontrolled, commonly defined as a monthly inflation rate of at least 50%.

Hyperinflation is extremely rare globally, as a monthly 50% inflation rate would translate to an annual rate of 12,875%, well above the current annual U.S. inflation rate of 8.2%.

High-profile economists including Mohamed El-Erian, president of Queens’ College, Cambridge, criticized the Federal Reserve last year in a Washington Post op-ed for keeping interest rates at near-zero for too long.

Low interest rates were “once needed and effective,” El-Erian wrote, but by the middle of 2021 they risked becoming “increasingly counterproductive for the economy” and could fuel a “perfect storm” of high inflation, slow growth, and financial instability.

Former Treasury Secretary Larry Summers has also criticized the Fed’s monetary stance, warning last year that the central bank was at risk of “dangerous complacency” over inflation owing to the protracted period of record-low rates.

Both El-Erian and Summers warned that if rates were kept low for long enough, runaway inflation could force the Fed into a knee-jerk monetary tightening stance that could severely hurt the economy.

[noobcarbuyer]

https://www.businesstimes.com.sg/government-economy/eurozone-downturn-deepens-points-to-winter-recession

Eurozone downturn deepens, points to winter recession

A CLOSELY-watched survey has showed eurozone October business activity contracted at its fastest pace since late 2020. German industrial orders also slumped more than expected in September, as foreign demand sank, putting Europe’s largest economy on course for recession.

S&P Global’s final composite Purchasing Managers’ Index (PMI) for the eurozone, regarded as a good guide to economic health, fell to a 23-month low of 47.3 in October from September’s 48.1, albeit just above a preliminary 47.1 estimate.

Anything below 50 indicates contraction.

“The final eurozone PMIs for October paint a clear picture of falling activity and sky-high inflation,” said Jack Allen-Reynolds at Capital Economics.

“While it does not yet point to the 0.5 per cent quarter-on-quarter contraction that we have pencilled in for Q4, the new orders and future output PMIs suggest that worse is to come.”

Asked what type of recession the eurozone would endure, 22 of 46 respondents in an October Reuters poll said it would be short and shallow; 15 said it would be long and shallow. Eight said it would be short and deep, and only one said it would be long and deep.

In France, the bloc’s second biggest economy, earlier data showed industrial output declined in September, although its PMI indicated that services sector growth slowed less than initially forecast in October.

Spain’s services sector activity contracted for the second straight month in October, weighed down by high inflation again, its PMI showed.

Inflation in the 19 countries using the euro currency surged more than expected last month, reaching 10.7 per cent, more than five times the European Central Bank’s (ECB) target. Consequently, the ECB is likely to press ahead with more interest rate rises, which will add to the burden faced by indebted consumers.

The ECB was the last among its peers to begin raising rates in this cycle, waiting until July. By year-end, the deposit and refinancing rates were forecast to be 2 per cent and 2.5 per cent respectively.

In contrast, the US Federal Reserve, which began hiking the rate in March, raised interest rates by 0.75 per cent again on Wednesday, in what has become the swiftest tightening of US monetary policy in 40 years.

In the eurozone, high operating expenses due to energy, wage and transport costs pushed services companies to raise charges sharply again.

The output prices PMI index was 62.7, the fifth-highest reading in the survey’s 24-year history, and just below September’s 63.2.

With no end in sight to the Russia-Ukraine conflict, nearly 65 per cent of 34 respondents in the October Reuters poll said the cost of living in the eurozone would worsen, or worsen significantly.

Since Russia’s invasion of Ukraine in February, energy costs have soared, and with winter nearing, several European governments have announced new measures to limit the increase in prices.

“The input and output price PMIs remain extremely strong. While they have fallen from their recent peaks, they are a very long way above their previous highs,” Allen-Reynolds said.

“The upshot is that Europe looks set for a painful winter of weak activity and strong inflation.” 

[Sdf4786k]

Too many poor people in our country’ says Tommy Koh, upon learning many Singapore students are in financial need
 

https://theindependent.sg/too-many-poor-people-in-our-country-says-tommy-koh-upon-learning-many-singapore-students-are-in-financial-need/
 

looks like we may do more to help those in needs .. 

the handout during the virus may be one factor that have spike the inflation  and the divide has become wider.

[Wt_know]

24 minutes ago, mikk123 said:

too many poor people? not true. I see too many BMW and Merc on the road nowadays and COE at 100k! Singapore is rich and everyone is rich! 

yup ... high debt is not equal poor .... LOL

Edited December 12, 2022 by Wt_know

[Atonchia]

11 hours ago, mikk123 said:

too many poor people? not true. I see too many BMW and Merc on the road nowadays and COE at 100k! Singapore is rich and everyone is rich! 

Could this be the reason they become poor. Spending too much🤣. 

Edited December 12, 2022 by Atonchia

[Throttle2]

13 hours ago, Atonchia said:

Could this be the reason they become poor. Spending too much🤣. 

That is the reason.  
Was the case before, is more of the case now due to inflation.

last time people earn $150kpa, they buy $150k Audi 

today people earn $150kpa, they buy $200k VW .

those who earn $100k buy $150k Jap/Kor

thats just for cars.  For many other things too.  So yes, people are overspending. Not accumulating.

 

[Wt_know]

2 hours ago, Throttle2 said:

That is the reason.  
Was the case before, is more of the case now due to inflation.

last time people earn $150kpa, they buy $150k Audi 

today people earn $150kpa, they buy $200k VW .

those who earn $100k buy $150k Jap/Kor

thats just for cars.  For many other things too.  So yes, people are overspending. Not accumulating.

 

hard truth .... 

last time people earn $150k/pa, they buy $1.25M+ landed 

now people earn $150K/pa, they buy $1.25M+ mickey mouse condo

same same but very different !

Edited December 13, 2022 by Wt_know

[Throttle2]

2 minutes ago, Wt_know said:

hard truth .... 

last time people earn $150k/pa, they buy $1.25M+ landed 

now people earn $150K/pa, they buy $1.25M+ mickey mouse condo

20yrs ago yeah.  $1.25m can get 4000sft landed easily

now earn $150kpa , better dont buy a condo lah

Edited December 13, 2022 by Throttle2

[Stary]

On 12/12/2022 at 7:23 AM, Sdf4786k said:

Too many poor people in our country’ says Tommy Koh, upon learning many Singapore students are in financial need
 

https://theindependent.sg/too-many-poor-people-in-our-country-says-tommy-koh-upon-learning-many-singapore-students-are-in-financial-need/
 

looks like we may do more to help those in needs .. 

the handout during the virus may be one factor that have spike the inflation  and the divide has become wider.

Before I conclude anything from the article above, I want to know first how did he qualify students as needing "financial assistance"?  Do they have to submit family or personal income documentary proof or is it something that any student can just apply by writing in some justifications?

If it is the latter, then it is hard to really quantify how many who apply are truly poor. Unfortunately, he did not mention how they qualify the eligibility of students who apply for financial assistance.