"The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point," it said.This last part is what keeps me up at night. Whip-saw inflation-deflation. I would love to get a better understanding of how that might play out.
"These fears are not groundless. The magnitude of the problems yet to be faced could be much greater than many now perceive," it said. "It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels."
Bonus -- there's also this happy thought worth noting:
"Should governments feel it necessary to take direct actions to alleviate debt burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.Fortunately we all know the government is not prone to gimmicks and palliatives.
"To deny this through the use of gimmicks and palliatives will only make things worse in the end," he said.
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