Albert Edwards: A global recession is on its way via The Guardian

The Federal Reserve’s pursuit of loose monetary policies since 2009 has been a misguided attempt to boost economic growth via asset price inflation, and we will now reap the whirlwind (the ECB, Bank of Japan and the Bank of England are all just as bad). One of the main problems has been the Fed’s overconfidence. Yet in the run-up to the 2008 crisis it demonstrated its lack of understanding of the disastrous impact of excessively low interest rates. Even in retrospect it remains in denial.

Further, we will probably see a trade war not unlike that in the 1930s. There are already signs of stresses and strains. World trade growth actually declined for most of last year. On 23 December the US imposed punitive sanctions on Chinese steel imports. Hence as renminbi devaluation accelerates, and a new more deadly phase of the global currency war unfolds, we are set to slide into another global recession. And can investors really be sure that policymakers won’t repeat the mistakes of the 1930s, and avoid an outright deflationary bust accompanied by a trade war?

Albert Edwards