The miseries cheer up
I listened to Société Générale’s strategists – Albert Edwards, Dylan Grice and Andrew Lapthorne – outline their views on 2013 this week. They often appear here, so regular readers will have a rough idea of what they said.
Albert said the Chinese credit bubble is “as obvious a catastrophe as the US in 2007”. He expressed horror at the extent of capital outflows from China. The huge amount of money fleeing what is supposed to be the world’s most successful economy, he says, represents both capital flight (Chinese nationals taking their money somewhere safe) and the fact that China “just isn’t competitive any more”. Then, for good measure, he forecast an emerging-markets balance-of-payments crisis.
Dylan had a go at the yen (“it’s toast”). Then he explained how in devaluing money we devalue trust (it undermines the integrity of all our transactions). He expects huge social unrest as inflation cracks global social cohesion – just as it did in the Roman Empire in the third century, Britain in the 17th, France in the 18th and Russia, Germany and Zimbabwe in the 20th century. Finally, he dismissed any idea that quantitative easing (QE) will ever end. Our largely unfunded welfare states mean “ongoing QE is inevitable”. There is no other way to pay.
• Read the full editor’s letter here: The miseries cheer up.