The State of Nature web site has invited a wide range of opinion on the above question. The whole review is here. This is my contribution:
The answer to this question has to be yes: capitalism is built on the concept of failure and so crashes are inevitable. The real question is how soon before the next crash?
My answer is soon. The reasons are multifold. It could be a hard Brexit creating a liquidity crisis for companies as lorries queue at ports meaning that businesses will fail as they run out of stock, orders and cash. Or it could be over-valued stock markets crashing, especially if central banks try (foolishly) to increase interest rates and trigger a household debt crisis at the same time. Alternatively it could be Chinese debt collapsing. Or (heaven forbid) Trump pushing his ‘big button'. And it might be something else entirely.
The fact is economies historically do downturns. We are overdue for one. That would not be too worrying except that austerity and a failure to address most of the failings in financial capitalism that led to 2008 have left us hopelessly ill-prepared for the next crunch. And that's why it will be a crisis and not a manageable bump.
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We are heading for a down turn.
Returns on property bonds and shares are very low. This is caused by the asset being too high.
Debt is very high at the moment we cant continue with these levels.
Would you care to offer financial advice based on this all-too-plausible analysis?
No
Because financial advice is regulated
George Osborne accused the last Labour Government of not fixing the roof while the sun shone. The last three governments have sold the roof.
The sun has also been privatised-don’t forget that!
LOL
(genuine lol)
Only two questions really:
a) When. Anybody’s guess because we can’t easily anticipate b)
b) What will trigger the reversal. It could start anywhere in a globally linked economy. Pundits say it could be car loans, excessive corporate debt, governments, who don’t need to, obsessing about deficits, public or private sector debt could start the avalanche or pick your pindit for a variation a theme.
In the meantime much vaunted ‘market melt-up’ will ensure that the height from which the stock markets fall gets ever higher (until it doesn’t).
My quite unregulated advice is don’t forget to wear your tin hat. 🙂
Or of course …… the Flu pandemic might get us first. That would not be a ‘Black Swan’ event, that will be a ‘Black Roc’ event.
Market Capitalism will not prevent that and will find it almost impossible to repair the inevitable destruction. It would be a very disruptive way to reset the global economy. Very expensive in all respects.
Ben Broadbent – Deputy Governor of the BoE, doesn’t think there is an issue with consumer debt. Listen to his views on the link below:
http://www.bbc.co.uk/programmes/b09kq1cg
The BoE did not think there was an issue in 2008
David says:
January 15 2018 at 4:52 pm
“Ben Broadbent — Deputy Governor of the BoE, doesn’t think there is an issue with consumer debt. Listen to his views ….”
Interesting how many times he refers to ‘guessing’. Says a lot really about how the BofE operates.
I would not bet against a perfect storm of all the above.
Off topic, but the below article is quite an accessible blog article which compellingly suggests why asset prices (us stocks in this instance) can rise when they shouldn’t (ie are already overpriced)
https://seekingalpha.com/article/4127985-s-and-p-500-goes
It suggests that “the first big sellers of stocks have arrived” but that may not necessarily impact the market price immediately as most trades are hidden in dark pools, so as not to disrupt the market. Secondary market demand then inflates the price. Its a compelling argument, and all the more reason for caution…
Tim Smith says:
January 15 2018 at 10:25 pm
“Off topic, but the below article is quite an accessible blog article which compellingly suggests why asset prices (us stocks in this instance) can rise when they shouldn’t (ie are already overpriced)
https://seekingalpha.com/article/4127985-s-and-p-500-goes
It suggests that “the first big sellers of stocks have arrived”
What it also suggests is that there are two stock markets. One for the cognoscenti and one for the mugs. The mugs play blindfolded.
Who would have guessed?