If you want an idea of how the current fiscal and asset bubble in the US might end, pay close attention to Bernard Connolly, esteemed consigliere to hedge funds and central bankers across the world for the last quarter-century.
It will not end in a soft landing – a “chimaera” – and will certainly not end in another leg of accelerating economic growth. Nor will it end in soggy stagflation.
US Federal Reserve chair Jerome Powell may soon be forced to oversee rapid interest rate cuts.Credit: Bloomberg
The invidious choice facing the Federal Reserve, he warns, is either to allow a deep economic slump to unfold, or slash rates to the bone before inflation has fallen back to target. The latter course will send the US dollar into freefall and destabilise the world’s dollarised financial system, an outcome already being sniffed out by the reawakening gold market.
Connolly is one of the very few prophets who foresaw both the Great Recession and the eurozone sovereign debt debacle, not just in vague terms – many did that – but with eerie precision and with a powerful intellectual argument for why they would happen and why they would prove so intractable.
His new magnum opus, You Always Hurt the One You Love: Central Banks and the Murder of Capitalism, is the story of the Faustian Pact made by central bankers from the 1990s onwards, when they first became addicted to bubbles and started stealing prosperity from the future.
You cannot pull consumption from the future forever without consequences. The future catches up with you.
His blistering critique over the decades has not stopped top officials at the Fed, the Bank of Japan, and the Bank of England from seeking his advice whenever trouble hits. After a long silence, he is again issuing warnings.
“There can be little doubt that there will be a US recession unless the Fed loosens hard and soon. The labour market is weakening and ‘excess savings’ from the pandemic-era handouts are exhausted,” he said.
“The likeliest near-term outcome is that, as in 2000 and 2007, the Fed holds off cutting interest rates just yet, citing worries that inflation is not convincingly and sustainably moving to target. By mid-year, the weakening of the economy will have become evident even to the Fed’s modellers. But they will not cut far enough or fast enough,” he said.
Central banks face a horrible choice, warns the prophet of the Great Recession
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20.03.2024
If you want an idea of how the current fiscal and asset bubble in the US might end, pay close attention to Bernard Connolly, esteemed consigliere to hedge funds and central bankers across the world for the last quarter-century.
It will not end in a soft landing – a “chimaera” – and will certainly not end in another leg of accelerating economic growth. Nor will it end in soggy stagflation.
US Federal Reserve chair Jerome Powell may soon be forced to oversee rapid interest rate cuts.Credit: Bloomberg
The invidious choice facing the Federal Reserve, he warns, is either to allow a........
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