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Page added on February 14, 2018
City of London financiers contemplate “imminent” 2018 US stock market crash of up to “50%”
Coming dramatic decline of US stock prices would trigger global recession, finds grim forecast to be explored at roundtable hosted by British financial services think-tank
Published as part of the launch of the new beta platform for INSURGE intelligence, a crowdfunded journalism platform for people and planet.
A new analysis published on the website of a London-based think-tank, funded by the world’s biggest banking and financial services institutions, warns that the US stock market is on the brink of an imminent crash that could trigger another global recession.
The document by a senior US economist and former Houblon-Norman Fellow at the Bank of England is published on the website of the Centre for the Study of Financial Innovation (CSFI), which runs around 100 roundtable events a year involving financial services insiders from the UK and beyond.
The document forecasts that in 2018, US stock prices are likely to plummet by as much as “forty to fifty percent” — compared to the less than five percent plunge in early February. The document was published weeks before the recent stock market volatility.
The warning of a forty to fifty percent drop points to the prospect of a global financial crash worse than the 2008 banking collapse.
It comes at a time when the Federal Reserve, Bank of England and other authorities are looking to tighten up their cheap money policies, as economic growth is at its highest levels since the 2008 slump.
The new analysis is an ‘open letter’ by US economist Robert Aliber, Professor Emeritus at the University of Chicago Booth School of Business, a world renowned authority in identifying the source of shocks behind over forty banking crises that have occurred since the 1970s.
The ‘open letter’, dated January 21st 2018, is published on CSFI’s website at this link http://www.csfi.org/s/QUARTERLYJAN12018.docx, and mentioned in an announcement of a forthcoming breakfast conversation with Professor Aliber in late February.
In the event announcement, CSFI director Andrew Hilton explains that Aliber is:
“… deeply gloomy about the outlook for global markets — and recently sent us an open letter (here) dated January 21, in which he predicted a fairly imminent decline in US stock prices of ‘forty to fifty percent’. That is even gloomier than his message five months ago — when he also told us that he had shifted his own personal holdings into cash in anticipation of a market bust. I am delighted (though apprehensive) that Bob has agreed to speak again — against a backdrop of ever-advancing Armageddon.”
Professor Aliber’s analysis is not officially endorsed by the CSFI. However, the institution clearly took his ‘open letter’ seriously enough that it saw fit to host a discussion around his forecast. He is due to speak at the CSFI on February 22nd.
CSFI’s programme coordinator, Angus Young, told me that:
“Prof Aliber is a respected economist, who kindly spoke at an event for us last year. He is visiting the UK this spring, and shared his open letter with us, on the back of which we agreed to coordinate a discussion of the argument laid out.”
CSFI’s supporters include around 80 financial services institutions including Barclays, Citigroup, City of London, HSBC, JP Morgan, the Bank of England, Bank of Italy, Bank of Japan, Lloyds Banking Group, the Financial Conduct Authority, UBS, the Swiss embassy in the UK, HM Treasury, among others.
In his ‘open letter’ Professor Robert Aliber notes that while the US and other major economies are performing on “nine cylinders” with numerous positive indicators from growth, employment, and investment, the global economy suffers from a “catalog of non-sustainable imbalances.”
AXIOM: The global economy suffers from a catalog of non-sustainable imbalances that have been sustained on the basis of a massive expansion of credit, fueling a rising debt overhang that is now worse than pre-2008 crash levels.
He argues that the belief in a continuing global economic boom for 2018 relies on hopes that these imbalances will not unravel. They encompass, he writes, “international payments imbalances, fiscal imbalances, misalignment of the prices of securities and real estate relative to their incomes”.
He warns that in 2018 the US stock market is due for a forty to fifty percent price crash, driven by a decline in the demand for US dollar-denominated securities:
“The prospect is that the decline in the demand for US dollar securities will lead to a decline in US stock prices, much as 1986 and 1987, or as in 2000, or as in 2006/7. How far will stock prices decline? The inference from the three previous dollar cycles is forty to fifty percent.”
INSIGHT: Past global financial crises suggest that in or shortly after 2018, a market ‘correction’ resulting in stock prices plummeting by 40–50% is to be expected. If this transpires, it would trigger a global financial crisis.
Aliber bases his forecast for 2018 on analyzing previous banking crises. Since the 1980s, there have been four waves of financial crisis sweeping across a total of sixty countries. Each wave of crisis has been enabled by a massive expansion of debt, which eventually becomes unsustainable. As the supply of credit (and thus debt) contracts, this creates a market ‘correction’ in the form of a recession:
“Each of these waves was preceded by a surge in cross border investment inflows and in the domestic supply of credit… Each of the banking crises since the early 1980s has resulted from a slowdown in the growth of credit, often prompted by move toward a more contractive monetary policy — a ‘correction’ of a non-sustainable imbalance. The borrowers had become dependent on the inflow of credit and could not readily adjust to the decline in supply.”
Such a decline in stock prices is a typical signifier of an incoming recession:
“The surges in stock prices in each decade have been domestic adjustments to the increase in cross border investment inflows; when these inflows slow significantly, stock prices decline. The declines in the first and second cycles were followed by modest recessions, a massive recession followed the decline at the end of the third cycle.”
One indicator that stock prices are heavily over-valued is that despite headline growth figures, productivity growth rates remain tepid, while US consumer savings are low. Unfortunately, Robert Aliber himself could not be reached for comment for this story.
Apart from anything else, the prospect of an imminent global financial crash in or shortly after 2018 demonstrates that the deep-seated structural failures behind the 2008 financial crash have never truly been resolved.
Moreover, if Aliber’s analysis is correct, it is less a matter of ‘if’, as opposed to ‘when.’
ACTION: The creeping resurgence of global financial instabilities underscores the unsustainability of the prevailing neoliberal economic model. New alternative economic models should be explored and disseminated as widely as possible.
149 Comments on "City of London financiers contemplate “imminent” 2018 US stock market crash of up to “50%”"
MASTERMIND on Wed, 14th Feb 2018 3:57 pm
Peer Reviewed Study: Society Could Collapse In A Decade, Predicts Math Historian
https://www.nature.com/articles/463608a
NASA Peer Reviewed Study: Industrial Civilization is Headed for Irreversible Collapse (Motesharrei, 2014)
http://www.sciencedirect.com/science/article/pii/S0921800914000615
The Royal Society: Peer Reviewed Study, Now for the First Time A Global Collapse Appears Likely (Ehrlich, 2013)
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/
Peer Reviewed Study: Limits to Growth was Right. Research Shows We’re Nearing Global Collapse (Turner, 2014)
http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf
Peer Reviewed Study: Financial System Supply-Chain Cross-Contagion: Global Systemic Collapse (Korowicz, 2012)
http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf
MASTERMIND on Wed, 14th Feb 2018 4:10 pm
‘WORSE THAN 2007’: Top Central Banker warns of looming wave of worldwide bankruptcies
http://www.telegraph.co.uk/finance/financetopics/davos/12108569/World-faces-wave-of-epic-debt-defaults-fears-central-bank-veteran.html
The world is drowning in debt, warns Goldman Sachs
http://www.telegraph.co.uk/finance/economics/11625406/The-world-is-drowning-in-debt-warns-Goldman-Sachs.html
‘Perfect storm’: Global financial system showing danger signs, says senior OECD economist
https://www.brisbanetimes.com.au/business/the-economy/perfect-storm-global-financial-system-showing-danger-signs-says-senior-oecd-economist-20180123-p4yyr2.html
Our Broken Economy, in One Simple Chart
https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-inequality.html?smid=fb-share
Financial markets at risk from bubble, IMF warns
http://www.telegraph.co.uk/business/2018/01/15/financial-markets-risk-bubble-imf-warns/
Global economy set for decade of gloom as World Bank predicts recovery will fizzle out
http://www.telegraph.co.uk/business/2018/01/09/global-economy-set-decade-gloom-world-bank-predicts-recovery/
Global Debt Hits Record $233 Trillion
https://www.bloomberg.com/news/articles/2018-01-05/global-debt-hits-record-233-trillion-but-debt-to-gdp-is-falling
makati1 on Wed, 14th Feb 2018 5:15 pm
The Great Depression bottomed out at a minus 80% but it took about three years to get there with a few small ups and big downs between. What would a DOW of 5,000 do to YOUR net worth/retirement? It would not affect me. Be prepared!
MASTERMIND on Wed, 14th Feb 2018 5:22 pm
13 School Shootings this year already…
Blame this A^^hole!
https://imgur.com/a/DCNhA
MASTERMIND on Wed, 14th Feb 2018 5:25 pm
Madkat
One thing to keep in mind during the great depression around fifty percent of the population was farmers. My Grandparents were and they said they didn’t even feel the pain at all. And now we have 3 times as many people as we did back then.
makati1 on Wed, 14th Feb 2018 5:47 pm
American isolationism in the making …
“America promotes unfettered neoliberal economics, i.e. so-called “free trade”, calling it “competition”. If another country applies it – it’s not fair, it must be sanctioned.”
https://www.globalresearch.ca/trump-threatens-china-and-south-korea-if-its-not-nuclear-saber-rattling-its-trade-war-by-beating-hot-air/5629234
“He (Trump) does not have any effective tools; increasing import tariffs? China is not dependent on exports to the US, or as I said before, China could devalue her currency and do a number of other things, like raising taxes for US corporations producing in China. But Mr. Trump knows all that. He has no effective tools for sanctioning either of the two Asian countries. It’s beating hot air.
And as you said, it’s deviating on the one hand from his US domestic problems with the economy – an ever-increasing budget deficit. I believe with the current budget proposal another US$ 4 trillion would be added to the deficit; and on the other hand, he wants to draw attention away from his war promotion propaganda, beating the war drums against Iran, Venezuela, North Korea… people, even in the US are getting sick and tired of his erratic pouncing.”
… lone country at a time.
Duncan Idaho on Wed, 14th Feb 2018 5:52 pm
“What would a DOW of 5,000 do to YOUR net worth/retirement? ”
Not much to retirement (which is already a reality).
But I do have fun playing with the dog track people.
Davy on Wed, 14th Feb 2018 6:14 pm
global research dot come is a nutter site
dave thompson on Wed, 14th Feb 2018 6:26 pm
A wise man once said,” the whole thing is held together with paperclips, rubber bands and bailing wire”
Duncan Idaho on Wed, 14th Feb 2018 6:30 pm
“global research dot come is a nutter site”
I believe this is a Medium website.
https://en.wikipedia.org/wiki/Medium_(website)
Boat on Wed, 14th Feb 2018 6:30 pm
Dave,
Your going to take away my grey tape?
Boat on Wed, 14th Feb 2018 6:39 pm
MM
What year is the collapse. Those links kinda come to different conclusions. Come on kid, nail it down so I can run a clock on you.
MASTERMIND on Wed, 14th Feb 2018 6:46 pm
Boat
It will be here sooner than you are even capable of handing!
Anonymouse1 on Wed, 14th Feb 2018 7:38 pm
Boatretard is well prepared for any eventuality dumbass. He has his instant ramen, his crayons, and his collection of cracked and damaged pool chemical pails, all filled with water. The instant ramen boatietard has stockpiled is just add water, so there is a 50/50 chance even he will remember the recipe. With his…somewhat retard-proof food supply, and his crayons to keep him otherwise occupied, all he will need to do is wait out the collapse until Wall-Mart, or (Walgreens) reopen.
Boatretard may find the lack of TV hard to take at first, but he can rapidly scrawl pictures on the walls of his trailer, a sort of TV proxy as it were, till things blow over.
Davy on Wed, 14th Feb 2018 7:43 pm
Boat has a personality and you don’t.
makati1 on Wed, 14th Feb 2018 10:34 pm
Amerika today:
“Williams: “It’s The Long-Term Insolvency Of The US Government That Markets Don’t Like””
“New Data Shows Yellowstone Supervolcano “Strained” – Magma Chamber Under Immense Pressure”
“Grand Theft Auto Chicago: Car-Jackings Surge To Decade Highs”
“Students Sign Petition To Ban “Offensive” Valentine’s Day”
“Trump’s Military Parade Could Cost Up To $30 Million”
https://www.zerohedge.com/
“Congress Indifferent to Puerto Rico’s Tragedy; U.S. Citizens Left in the Lurch”
“The Military Industrial Complex Strikes Again: War Spending Will Bankrupt America”
https://www.theburningplatform.com/
“Trump Triggered The IRS To DROP 298 Tax Regulations”
“How Our Dependence on Global Shipping Will Come Back to Bite Us”
http://www.shtfplan.com/
“Many older Americans are living a desperate, nomadic life”
“Unsafe water found in faucets across the U.S.”
“These Americans will never get Social Security benefits — and we don’t mean millennials”
“Pentagon unveils $686 billion military budget for FY19”
“Budget Woes Sign of a Dysfunctional Empire”
“How Establishment Propaganda Gaslights Us Into Submission”
“Peace: The One Thing the US Warmongers Do Not Want”
“The world’s worst money launderers are the UK, Switzerland and the USA”
http://ricefarmer.blogspot.fr/
And the Great Leveling continues…
Davy on Thu, 15th Feb 2018 3:37 am
BillyT, American today talks about our problems or other stupid places talk about our problems and not theirs. Asia is case in point. It is pretty much illegal in many places to criticize the authorities. Asia is a far worse place on many levels but you are in denial of that.
deadly on Thu, 15th Feb 2018 6:04 am
50 percebpnt correction? That’s all?
Only in America can anybody shoot and kill people like it is done anywhere in the Middle East.
America is great, not too difficult to see.
America needs more school shootings, a business model from anything can be profitable.
Security firms will be hiring, liberals will buy more guns, it is a boost to the economy to have more security.
There will be more school shootings, it has become a part of life in America.
Even the Norwegians copycat Americans shooting people. That Norwegian nut who shot a bunch of campers meeting somewhere in Norway was just trying to outdo the American efforts in shooting people like they are sitting ducks.
The act of shooting and killing students at schools increases employment at Pinkerton.
You have to look on the bright side.
There is always a black cloud of doom and gloom and if it can pay, in the long run, everyone benefits.
makati1 on Thu, 15th Feb 2018 6:23 am
deadly, it ALL helps the GDP. Shooting sells:
bullets, doctors services, medicines, emergency services, hospital/morgue expenses, police expenses, hearse, gas, funeral home services, mortician, casket makers, graveyard hole diggers, tombstone carvers, granite quarrying, florists, condolence cards, etc. American funerals are expensive and hospital stays are outrageously expensive. BUT, it all adds up.
twocats on Thu, 15th Feb 2018 7:32 am
the global financial brethren and CBs need to be careful. the same BTFD mentality and Quant Algos that drove the market up could be the same forces that drive it down.
Example – if a large firm gets nervous and pulls out, that could create a margin call on a highly leveraged firm that then also needs to sell, which could force a mutual fund to have to sell to cover the withdrawal-stampede as people head to the doors. Then will come the algorithms as they follow that trend into oblivion.
Algorithm is just a fancy word for rule following pattern recognizer – the rules are inherently biased to whatever is “making the most money” and if the trend becomes “selling and shorting is how you make money” for long enough that will become many an algo strategy. They’ll have to pull the plugs on the algos and that could end the market entirely since human based trading can’t create the back and forth buying pattern that has been driving the market for the past decade.
the only thing keeping the market from imploding right now is corporate buy backs. but if borrowing rates go up too much more they may not be able to afford buy backs if they are already leveraged.
DerHundistlos on Thu, 15th Feb 2018 10:17 am
Gotta love this…..
President Dump has finally filled the position of Science Advisor to the Office of the President of the United States with…..
A 31-year-old college graduate with a degree in human resources management, vocal anti-environmentalist, and Dump campaign worker. Dump’s press release explained this “unconventional” appointment as necessary to infuse a “fresh perspective” into the position.
Every day is even more bizarre and twisted than the day before.
Sissyfuss on Thu, 15th Feb 2018 12:03 pm
It”s too horrible to contemplate, Derhund. Pruitt is a monstrosity as well but Grifters only connection to Nature is on one of his overpriced, over fertilizered golf courses where he is surrounded by and worshiped by sycophantic elites who are getting everything on their agenda actuated. It’s a great time to be rich if the clock weren’t ticking so loudly.
Duncan Idaho on Thu, 15th Feb 2018 12:44 pm
“A 31-year-old college graduate with a degree in human resources management, vocal anti-environmentalist, and Dump campaign worker. Dump’s press release explained this “unconventional” appointment as necessary to infuse a “fresh perspective” into the position.”
Late stage capitalism was never going to be fun.
Sys1 on Thu, 15th Feb 2018 1:23 pm
Imminent crash? Pop corn time! Enjoy!
MASTERMIND on Thu, 15th Feb 2018 1:43 pm
Mass School Shooter was a Trump supporter!
https://heavy.com/news/2018/02/nikolas-cruz-florida-instagram-nicolas-nicholas-social-media/
https://imgur.com/a/fSQvj
Trump supporters aren’t even humans! Hillary nailed it when she used the world “deplorable”…
onlooker on Thu, 15th Feb 2018 1:48 pm
The Mass Shooter was simply a deranged individual. Could have been of any political stripe/affiliation
MASTERMIND on Thu, 15th Feb 2018 2:10 pm
Onlooker
Yea I know those liberal hippies are always going on shooting sprees!
MASTERMIND on Thu, 15th Feb 2018 2:11 pm
Florida school shooting suspect is a white nationalist, group leader says
https://www.cbsnews.com/news/florida-school-shooting-suspect-nikolas-cruz-white-nationalist-republic-of-florida/
Davy on Thu, 15th Feb 2018 2:44 pm
Untreated mental illness combined that with a cultural of hate in a gun culture. There are many variables involved becuase there are many different circumstances. Mostly it is alienated young men. Young men without a future and without connection. Isolated egos that collapse in on themselves.
Wisdom seems to be saying the American culture is not responsible enough to allow citizens to bare arms anymore but without a culture of wisdom does it matter? Maybe it is just too late culturally anyway so now individual wisdom says with so many idiots with guns means I need them too. We now clearly have a cycle of dysfunction without easy solutions
JH Wyoming on Thu, 15th Feb 2018 2:54 pm
At this point after so many school shootings and other shootings in the US, we probably just need to accept it as part of the American way; apple pie, Chevrolet’s, Mom, the flag and the risk of maiming and or death from random shootings. The military weapons for people, republicans and the NRA won. It’s a lock. We aren’t able to say anything against it or we’ll be labeled disrespectful of the military.
MASTERMIND on Thu, 15th Feb 2018 3:39 pm
With all these mass shootings happening in America. Some countries might want to think about putting a travel ban on Americans!
MASTERMIND on Thu, 15th Feb 2018 3:48 pm
Expect more Vegas Massacres, more church shootings, more Columbines…As society keeps collapsing
https://imgur.com/a/m8uYj
makati1 on Thu, 15th Feb 2018 4:52 pm
“It’s actually quite extraordinary that a people so systemically and obviously preyed upon cannot see what’s right in front of them. It’s mind-boggling that tens of millions are so easily divided and conquered into manufactured tribes intent on avoiding at all costs what’s really going on in this country, such as a fraudulent financial system, endless imperial wars and the ever encroaching surveillance state. Long story short, we as a people simply refuse to accept what’s really causing the rot in this country and continue to be mesmerized by bread, circuses and opportunistic pundits leading us straight into oblivion.”
https://libertyblitzkrieg.com/2018/02/15/insanity-fatigue/
“I suppose this is always the way it is at the end of a failing and bankrupt empire, it’s just extraordinary to watch it happen in real time. The total insanity of the political debate in the U.S., and a lack of any willingness to admit our real systemic problems — let alone face them — is what convinces me without a doubt that this train is headed straight into a brick wall. …the U.S. has the furthest to fall given it is the world’s dominant power armed with the global reserve currency. An empire with such an overwhelming structural advantage can last a lot longer than it should in the face of monumental incompetence, but the day of reckoning is coming. …If the general public refuses to confront our real issues,the politicians and bureaucrats sure as heck aren’t going to. As such, it appears imperial implosion is inevitable at this point. …There is no institution left in America that can be called democratic, and thus there is no internal mechanism to prevent a descent into barbarity.”
Nuff said.
onlooker on Thu, 15th Feb 2018 5:10 pm
I believe the US was initially a noble enterprise that for one brief instance had a chance to perhaps change the fortunes of our species. But then the pecuniary interests got a hold on it and ever since have never let go. Specifically, the Bankers originating from London ie. Rothchilds. So after the Civil War, the ruling elites of this country were totally mixed with the business world elites. So in fact what we have had is a Plutocracy or the rule of money. The whole thrust of this ruling structure has been to perpetuate the economic, military and political hegemony of the US. To that extent they have successfully distracted and enticed the populace to focus on trivial issues in order to deviate them from the crucial ones you cited Makati in the excerpt you included. And at the heart of the malaise and distraction is a ethos of greed and selfishness which ironically is the product of the Middle Class which was created in this country and of the hyper capitalism practices here. So yes no hope exists but to burn to the ground and eventually the entire world will and our species will NOT rise from the ashes like the Phoenix.
makati1 on Thu, 15th Feb 2018 5:24 pm
Well said, onlooker. Well said.
onlooker on Thu, 15th Feb 2018 5:28 pm
Yes Mak, sad but true
DerHundistlos on Thu, 15th Feb 2018 5:38 pm
Echoing big mak attack kudos @ lookeron.
makati1 on Thu, 15th Feb 2018 5:43 pm
Chinese New Year. Holiday here in the Ps. The year of the Dog. Will it be a fuzzy puppy or …? Wait and see. Happy Holiday!
onlooker on Thu, 15th Feb 2018 5:55 pm
Happy Chinese New Year Mak. 60 degrees today in NY yeyy!
Boat on Thu, 15th Feb 2018 5:58 pm
Guys, the US hasn’t changed much since day one in this respect. George Washington organized a militia to extract taxes from whisky producers not long after independence from England. This was to pay for money owed to the French and Spanish.
There was no golden era or protection from the rich. And…he was the father of our nation.
Sissyfuss on Thu, 15th Feb 2018 6:00 pm
A fuzzy puppy or a bitch?
Sissyfuss on Thu, 15th Feb 2018 6:02 pm
If we aren’t interested in keeping military assault weapons out of the hands of troubled youth then just call it population reduction.
GregT on Thu, 15th Feb 2018 6:31 pm
I also fully agree Makati and onlooker.
Sad but true indeed.
Gong hei fat choi!
onlooker on Thu, 15th Feb 2018 6:31 pm
That is a good point Boat but for a brief time there, we had some pretty noble sentiments expressed like “All Men are created equal “, that seemed to unite people and stir their hearts. Even if it was probably a Ruse
MASTERMIND on Thu, 15th Feb 2018 7:00 pm
Hey Madkat
Blowing someones else’s candle out doesn’t make your shine any brighter!
Food for thought sucka!
MASTERMIND on Thu, 15th Feb 2018 7:25 pm
Madkat
I am sure all those China men working in sweat shops will have a happy new year!
Boat on Thu, 15th Feb 2018 7:49 pm
Trump takes one on the chin.
https://www.google.com/amp/thehill.com/policy/energy-environment/374122-court-rules-energy-dept-must-implement-obama-efficiency-rules-it%3famp#ampshare=http://thehill.com/policy/energy-environment/374122-court-rules-energy-dept-must-implement-obama-efficiency-rules-it
GregT on Thu, 15th Feb 2018 8:03 pm
“Trump takes one on the chin.”
“The Trump administration must carry out the implementation of four energy efficiency regulations that it has delayed for more than a year, a federal court ruled Thursday.”
“At issue in the Thursday case are rules setting energy efficiency standards for portable air conditioners, air compressors, commercial packaged boilers and uninterruptible power supplies.”
Poor Donald, I’m sure he’s hurting pretty bad after that beating.
Cloggie on Thu, 15th Feb 2018 8:58 pm
“Florida school shooting suspect is a white nationalist, group leader says”
The right to bear arms will be abolished.
After CW2.
Promised.
MASTERMIND on Thu, 15th Feb 2018 9:06 pm
Clogg
The right to bear arms will never be abolished because nobody trust the US government enough to be the only ones with guns. You are just a paranoid lunatic.