My long career as a macro-economist both at the IMF and
on Wall Street has taught me that it is very well to make bold
macro-economic calls as long as you do not specify a time period within
which those calls will occur. However, there are occasions, such as
today, when the overwhelming evidence suggests that a major economic
event will occur within a relatively short time period. On those
occasions it is very difficult to resist making a time-sensitive bold
economic call.
So here goes. By this time next year, we will have had
another 2008-2009 style global economic and financial market crisis. And
we will do so despite Janet Yellen's recent reassurances that we would
not have another such crisis within her lifetime.
There are two basic reasons to fear another full-blown
global economic crisis soon: The first is that we have in place all the
ingredients for such a crisis. The second is that due to major economic
policy mistakes by both the Federal Reserve and the U.S. administration,
the U.S. economy is in danger of soon overheating, which will bring
inflation in its wake. That in turn is all too likely to lead to rising
interest rates, which could very well be the trigger that bursts the all
too many asset price bubbles around the world.
Read more: US Economy Is in Danger of Overheating and Exploding Into Financial Crisis | Economic Intelligence | US News
