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The Business: Global Economy Heads Towards A Soft Landing.

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'Global economy heads towards a soft landing':


The global economy is on course for a soft landing, according to a poll this weekend of 240 economists from the world's top financial institutions and think-tanks.

Economic growth is set to slow this year and next amid rising interest rates, weaker house prices, high commodity and energy prices and fresh geopolitical tensions, the economists warn.

The global liquidity bubble, which propped up global growth for so long, is now being pricked by central banks desperate to stem surging consumer price inflation, according to a series of special reports this weekend by Morgan Stanley. It also warns that the era of cheap money is finally coming to an end.


The level of global free liquidity, measured as the growth in the short-term money supply minus the growth of nominal GDP, surged by 60% since 1996, fuelling asset and commodity prices and now spilling over into consumer prices. But global interest rates are already back up to 1.5%, against minus 0.3% in spring 2004, and close to the average of 2% that prevailed during 1991-2000, suggesting that liquidity is about to be squeezed savagely. By curtailing the rate of growth of liquidity and making it more expensive for companies or individuals to borrow, central banks are hitting share prices, bond markets, commodity and precious metal prices as well as the international housing market.

Andy Xie, economist at Morgan Stanley, said: "Several one-off disinflationary factors -- the emerging market crises, China's state-owned enterprise reform, and Japan's banking reform -- allowed big central banks to maintain low interest rates despite strong growth. As these disinflationary factors vanish, the central banks will have to decrease liquidity to stop inflation." He added that "inflation has been a problem for the past six quarters. The major central banks have been in denial, citing low core inflation that was just catching up with headline consumer prices. Now, the central banks are worried about their inflation-fighting credibility and have abruptly changed their view".

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What bank ever predicted a recession ?

When liquidity is "squeezed savagely" you don't end up with a "soft-landing".

Comprendé ?

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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