Albert Edwards: the financial ice age is coming

published 25 January 2019

Albert Edwards, the ultra-bearish global strategist at French bank Socit Gnrale, has argued for many years now that the world is facing a financial "ice age", with the developed world following Japan into an era of collapsing bond yields and flattening equity prices. He hasn't changed his mind yet, telling a conference in London this month that yields on US government debt will slide below zero percent during the next recession.

That next recession is shaping up to be a painful one, given high levels of corporate debt among US companies. But the US is not the only one in trouble. China is still struggling, and in Europe, Italy led by populists including Matteo Salvini is the big danger, says Edwards. Unusually, the European Union (EU) is less popular among the young than among the old in Italy, and so Italian hostility towards the EU is only set to grow. Edwards blames the strictures of the euro, which keeps labour costs and thus unemployment high, hitting younger workers hardest.

As Buttonwood notes in The Economist, there are hints from Edwards that a "post-ice age era" will dawn, "in which bonds are to be avoided and inflation hedges are the thing to own". That could come once a deep recession forces politicians to be even more radical than they've already been perhaps by printing money to fund public spending directly, for example. But for now, his message remains the same "the world is ending". Keep some money in cash and gold.