Tuesday, July 01, 2008

Global finanacial storm

Barclays warns of a financial storm as Federal Reserve's credibility crumbles
US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard


Barclays Capital has advised clients to batten down the hatches for a worldwide
financial storm, warning that the US Federal Reserve has allowed the
inflation genie out of the bottle and let its credibility fall "below
zero".

"We're in a nasty environment," said Tim Bond, the
bank's chief equity strategist. "There is an inflation shock underway.
This is going to be very negative for financial assets. We are going
into tortoise mood and are retreating into our shell. Investors will do
well if they can preserve their wealth."

Barclays Capital
said in its closely-watched Global Outlook that US headline inflation
would hit 5.5pc by August and the Fed will have to raise interest rates
six times by the end of next year to prevent a wage-spiral. If it
hesitates, the bond markets will take matters into their own hands.
"This is the first test for central banks in 30 years and they have
fluffed it. They have zero credibility, and the Fed is negative if
that's possible. It has lost all credibility," said Mr Bond.

1 comment:

Delightfully Imperfect said...

I am afraid those who feel great financial distress is near are very correct. The US has serious financial problems to face, and the past 8 years of irresponsible finance may be what tips the scale to side the major depression; though no one wants to admit that yet.

Company after company is laying off workers, inflation is roaring in like a catagory 5 storm, and government is continuing to use the tax-payer's credit card in a wild spending spree. Meanwhile looming infrastructure problems exist, homeless is grows, and the againg baby-boom generation is beginning to reach an age where many of them will be unable to meet their own needs.

The young people, strangled by college debt, will be facing increasing tax burdens. The return of deployed forces will add to the growing unemployment problems.

People will begin asking, "Who robbed America?" After the shock and disbelief that this could happen begins to wear off, the citizens will be left with the reality that their nation has fallen, not by military power but my financial collapse.