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Morbius Glass Forecasts for 2008 (economic)

Posted by Adrian on December 18, 2007

When I compiled the World Crisis scenarios for the 21st century. It was done with with gathering evidence for potential risks that the human race face in the 21 st century. The recognized risks are Global Warming, Bird Flu, Nuclear War/conflict or tensions, economic problems globally. In late 2006 the first morbius glass forecast was posted filed under Forecasts for 2007, the main aspect for that forecast was the economic news from the US at the time. Which was the falling housing market (subprime mortgages), I called the recession in the US mid 2007, it could be argued that the US went into a growth recession mid 2007, as growth was negligible or even at times negative to GDP in the last quarters of 2007. Suffice to say what was not anticipated was the severity of the wide spread global credit crunch and a far reaching and alarming liquidity crisis between financial institutions which has the potential for a complete freeze of liquid money markets. However I did follow the credit/liquidity and US housing crisis though out 2007, filed under Finance and Economics/ Strategy and Society. I overestimated Europe and assumed that their policy of monetary tightening would slow down inflationary pressures, in which both the European Central Bank and Bank of England has allowed inflation to become a runaway train. With massively overinflated housing markets in Spain and Ireland the indicators are pointing to an economically dangerous tipping point for the Euro zone economy. With the UK now in a housing based recessionary down slide, not unlike the US. So for 2008 morbius glass forecasts they will all be predominantly economic based, I personally believe we are entering into a serious and problematic year economically for the world. This will also be followed in the World Crisis Scenarios for the 21st century – updates.

  • Overinflated housing markets such as Spain and Ireland will collapse, this will also cause their stock-markets to also decline sharply. Refinancing and injections of liquidity will be negligent as local banks have contracted balance sheets, unable to look for liquidity themselves. Loans and money used to for development and expansion will become nonexistent.
  • The UK will go into a severe recession similar to the US, lead by the housing market and subprime borrowers. Higher inflation will also effect the consumer, a possible UK bank may become insolvent, similar to Northern Rock but without a bail out fund. The Bank of England will continue cutting rates to spur the economy, this will only compound inflation.
  • Inflation worldwide will be a major issue for the world economies, with developing economies paying more for fuel, food and amenities. Prices will decline in all asset markets (throughout 2008 ) more notably in the property markets, this will lead to a massive glut in housing in most developed world markets. Affordability problems will shift from assets such as housing (it will decline) to basic consumer amenities such as food (food costs will rise dramatically). Spurred on from the drought conditions in the Northern and Southern hemispheres. Wheat, milk and crop foods will become a scarce commodity. Unfortunately this will lead to new food (most needed) shortages in Africa and even the middle east.
  • Oil will reach $120.00+ for a barrel of oil, the $100.00 dollar market will be the mark that traders will trade from, no longer slipping under $100.00. Peak Oil theory may hold greater validity as oil will become too expensive to draw from the ground causing the oil price too skyrocket in 2008. This will effect everything from industry and to the consumer, this could lead to inter border conflicts in oil regions
  • The biofuel industry will collapse in 2008, due to the expense of running the industry. Corn and other plantation biofuels will cease to be profitable, governments may exercise protective tariffs to keep the prices down on crop based biofuels. With fossil fuel costs increasing and the mechanics of the bio industry still reliant on fossil oil for its operations. The costs will be enormous. No cheap renewable biofuel will be available, therefore biofules as a fossil oil alternative will be unappealing to both industry and the consumers.
  • The global credit crunch will be severe and devastating as banks will contract their accounts and become at times illiquid. Possible restrictions on credit and accounts may occur, with banks trying to keep their accounts from becoming insolvent. We may see halts on credit card use, despite repayments being regular. HSBC noted in a recent disclosure statement that they could freeze any account and anytime for any reason. Will banks rewrite their ‘conditions’ to customer accounts to protect their balance sheets? The liquidity crisis will worsen despite injection of funds by the world banks. Forecloses will continue in the US, moving over to the Jumbo Loan market. Falling houses prices and huge inventory of unsold stock will see a collapsed housing market never seen in the history of America. Surpassing the Great Depression housing collapse.
  • Due to interconnected global money markets, America can sneeze and the world will feel it. In the case of China, the country just needs to pause and look concerned and it will feel like a heart attack for the rest of the World. The term ‘De-coupling’ was a phrase coined by optimist economists, if the world is to shake off an American economic down-slide it could de-couple it’s self from the US and adjoin it’s self to Asia. A terribly misleading term, because de-coupling cannot exist in a global financial market as it is the current market. The world markets are still connected to the US markets and their trade markets. China will slow and contract in 2008 causing another shudder to the financial markets. Especially to countries that relied heavily on China for their exports. China will make the same error Japan made in the early 90’s with far too much liquidity . The Chinese markets will panic at some point in 2008 causing a massive sell off of equities, Chinese banks may also constrict under the liquidity crisis that is sweeping the world in 2008. A Chinese stock market crash is very possible in 2008.
  • All markets will decline, with exception to commodity markets which will rise. Gold will stop it’s correction in 2007, and increase in value right throughout 2008. It may reach $1000.00 and ounce mid 2008. Wheat, other food commodities markets will also increase.
  • The USD may be sold off (Asian reserves, Japan and China) and middle eastern countries may also drop the dollar peg, opting for a broader currency market. This will cause the USD to collapse and send the world into a currency crisis. No real ‘flight to quality’ currency will exists in 2008. Rumor has it some hedge funds have long bets that in 2008 the USD will no longer be pegged to the Riyal and other middle eastern currencies.
  • In 2008 the world will enter into a stagflation (food, oil) based recession, in no way comparable to the 1970’s era of stagflation. We will also see rapidly declining prices in housing globally.
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2 Responses to “Morbius Glass Forecasts for 2008 (economic)”

  1. […] slowing down (or in recession), oil will continue to trade above the $100.00 mark as mentioned in Morbius Glass forecasts 2008 (economic) . The implications of a high oil price is a big worry for the world economy and society, now […]

  2. […] the global banks, it’s not surprising a bank was going to become insolvent. I speculated in morbius glass forecasts for 2008 that it would be a smaller bank to medium size bank that would get wiped out (with no return) from […]

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