Why Citi Is Worried: "This Is The Tipping Point"
By Tyler Durden
In his latest must read presentation, Citigroup’s Matt King continues to expose – and be very concerned by – the increasing helplessness (and cluelessness) of central bankers, something this website has done since 2009, fully aware how it all ends.
Take Matt King’s September 2015 piece in which he warned that one of the most serious problems facing the world is that we may have hit its debt ceiling beyond which any debt creation is merely pushing on a string leading to slower growth and further deflation.
Or his more recent report which explained why despite aggressive easing by the BOJ and ECB, asset prices continue to fall as a result of quantitative tightening by EM reserve managers and China, which are soaking up the same liquidity injected by DM central banks.
Or his February 2016 report, in which his bearishness was practically oozing from every page, and which started off with the stunned observation, that “none of this is “supposed” to be happening” – inflation and economic growth are supposed to be rising in a world as manipulated by central bankers as this one. Instead, the opposite is taking place.” He then went on to say that “maybe it will all fizzle by itself”… “but if it doesn’t, then we have a problem.”
It wasn’t just one problem: as we laid out it was at least 8 problems, of which the last one was the most dire one: “if there is a next phase, it’s likely a crisis of confidence in central banks.” Because if central bank confidence goes away, so do the asset price gains of the past 7 years, all of which have been on the back of an unprecedented push by central banks to preserve the system if only that much longer.
Sure enough, central banks appear to have heard his ominous warning, and starting with the January Shanghai Accord, and the concurrent Beijing debt firehose which unleashed $1 trillion in debt in the first quarter, managed to stabilize if not the world, then certainly stock markets for a few months, courtesy of another epic credit-impulse driven push.
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Over the weekend, King released his latest must read presentation, dubbed aptly enough “When the wisdom of crowds becomes the blundering herd”, in which he no longer laments the failure of central planning – we assume it’s taken for granted – and instead proceeds to highlight some of the direct consequences of living in a world in which extreme events are becoming increasingly more common, in everything from elections and polls (for which Trump is especially grateful)…
… to historic polarization in politics…
… to polarization in geography…
… even to polarization in weather…
… and of course, record polarization in the economy…
… in wealth and income…
… and markets…
… King then goes on to show …read more
Source: Why Citi Is Worried: "This Is The Tipping Point"
