Steen Jacobsen, Chief Economist and Chief Investment Officer of Saxo Bank sees economic slowdown ahead.
Specifically, his “Four Horseman” indicators: the drivers of economic growth, are all flashing red.
Jacobsen believes that the central banks will continue their liquidity tightening efforts for as long as they can get away with (i.e., until the financial markets start toppling over). In his opinion, they eased way too much for way too long; and the malinvestment and zombification that resulted needs to clear the system — and it will likely do so more violently and painful than the central banks will like:
I like to make things simple. Right now we have the Four Horsemen: the four drivers of the global economy. They are the quantity of money, which is falling; the price of money, which is rising; the price of energy,which is a tax on consumers and is rising; and globalization/productivity, which is falling.
So, if you look at the economy as a black box, I really don’t know what happens inside of it. But I can observe what goes into the black box: it’s these four things.
Globalization / productivity, we know that’s all about Trump, trade war and the likes. It’s not exactly improving; it’s actually worsening.
As for the quantity of money, a lot of people argue with me that the Central Banks are still expanding their balance sheets, but the fact of the matter is that the QT in terms of the U.S has been reducing the Federal Reserve balance sheet. And we have a stealth reduction of the balance sheet in terms of the Bank of Japan. The EBC would love to cut and is publicly committed to doing so. The Bank of England is doing its first hike. So the quantity of money is falling.
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