The world could be on the verge of economic collapse and investors should be prepared for a stock market crash in 2015. At least that’s the warning from former Reagan administrator David Stockman.
“I think it’s pretty obvious that the top is in,” the ex-OMB director explained last week on CNBC’s Futures Now. Stocks are a “disaster waiting to happen.” (Source: CNBC, last accessed August 10, 2015.)
Because of massive money printing programs by central banks around the world, the whole world economy remains fragile. The consequences of such monetary policies have created a “debt supernova,” which could lead to “the end of the central bank enabled bubble.”
Worse, Stockman argues, is that the crises in emerging markets like China and Argentina are far from over. Excessive investments in those countries have created an over capacity situation which could ignite a Chinese stock market crash in 2015 and eventually drive the whole world into a recession.
“The whole global economy since 2008 has been driven forward by this massive investment and construction and borrowing spree in China,” said Stockman. “The point that I’m making is that it’s over.”
Regardless of how the labor market would perform in the next few months, and whether the Federal Reserve would raise the interest rate in September, an economic collapse in 2015 is certain, Stockman argues.
“It has to do with the fact that the world economy, including the U.S., is heading into what is clearly going to be an epochal deflation to the likes of what we have never experienced in modern time.”
Who is to blame for the world’s economic malaise? Stockman points the finger squarely at the Federal Reserve, who have kept interest rates artificially low. He argues the central bank’s actions have only inflated bubbles rather than fundamental economic growth.
“I think what we are seeing is the beginning evidence that the central bank-driven credit economy is over and we are in a new era.”