Are we facing a global financial apocalypse?
4th Apr 2022
Reading Time: 4 minutes
Are we facing a global financial apocalypse?
Our founder and CEO Jasmine Birtles recently hosted a free webinar all about the current state of the economy and the worries we are all facing at the moment. She was spurred to create this webinar due to the bond market bubble, a potential currency resent across the world, central bank digital currencies (CBDC’s), the possibility of Russia returning to the gold standard, rampant inflation and stagflation, a property market bubble and more!
It looks like the perfect storm, but as Jasmine says; “Every cloud has a silver lining!” Things are looking scary and problematic in every aspect of our finances and the global economy, but there are opportunities at every turn.
Jasmine is joined by Tim Price, founder of Price Value Partners, Cameron Parry, founder of Tally Money, Johnny Fry, a former fund manager and the founder of Team Blockchain and last but not least Adrian Lowery, former investment journalist for the Daily Mail and This Is Money and now working for investing platform BestInvest.
Did you miss it? Don’t fear! You can watch the full webinar and read the summary of the key points below.
Do you think we are facing a global financial apocalypse?
- Financial apocalypse is strong – it doesn’t necessarily mean Armageddon, but I think we are going to shortly see who’s who and what’s what
- My background is in the bond market and I’ve written two books about investing, one called ‘The War On Cash’ and the other “Investing Through The Looking Glass”
- What is common to both of those is that the problems in the financial world all stem from the bond market, which is doing poorly at the moment
- The overriding problem is that the world is drowning in debt – corporate, government and household
- We are seeing so much inflation because the governments are deliberately creating it
Is this similar to the financial crisis of the late 2000s?
- Our societies are very resilient, and we adapt even under very bad conditions
- We come up with ways to do things better in the future
- In some ways it’s quite similar, but the leaders and banks won’t be able to buy themselves as much time as before
- Whether you are a household or country, if you have too much debt it can consume you
- That’s why it’s good to have your money tied to something, so you can understand what is happening with it
- Whether it’s gold, bitcoin etc
- Central banks can make poor decisions
What do you think will happen next?
- Markets move and they have a degree of memory attached to them
- It is unlikely it will be entirely the same as previous financial crises
- This could be an opportunity for investors, as you have access to information in a way never seen before
- Nobody with any practical investment experience has seen a bare bond market
- The question is whether the bond market may have to bring down the stock market too
- The bond market has shown signs it is likely to impact the growth of stock market too
- Pensions are mainly invested in the bond market, so it is bad news for pensions in part
- There are contradictory signals everywhere
- For the general person wondering whether we are heading for a recession, it is not yet abundantly clear
- For now, at BestInvest we are suggesting ways to diversify portfolios further to encourage growth
What do you think is going to happen to the stock market?
- It’s hard to say – if you told me in 2019 that we would be hit with a global pandemic which would close large parts of the economy down for months on end and then it eventually looks like it’s starting to come to an end, Russia would then invade Ukraine and potentially start a world war you would have thought the stock market would be lower, but the FTSE is the same, roughly around 7.5 thousand
- Is this building up to a big crash? We are all waiting but money has to go somewhere and there aren’t many places for it to go except equities lately
How has quantitative easing impacted the economy?
- Inflation occurs for many reasons, not just quantitative easing (money printing)
- It’s not all down to central banks – they can’t change interest rates enough
- Money creation comes from the writing of loans from the banks
- When interest rates go below 3% people can’t borrow as much as they were going to borrow, they aren’t that motivated
- Inflation is rising 1% a month roughly, and The Bank of England are adding interest rates by 0.25%
- Many banks can’t raise interest rates rapidly because it will put both banks and countries into bankruptcy
- Inflation comes from the velocity of money in the system too
- What’s coming won’t necessarily be bad for everyone – as individuals we need to get prepared and get on the right side of this
- With Tally, any money you put in is immediately converted to gold, a great hedge against inflation
What about digital currency?
- The reason we will have central bank digital currencies is because it will give the government another tool to manipulate the economies
- They are an alternative to the current banking system
- The price of personal freedoms is a big issue
- If they are allowed to create CBDCs, it’s the end of financial freedom as we know it
- I don’t think the government has sufficient support for this yet
- There are going to be new monetary regimes in future
Do you think there is an alternative to CBDCs?
- They don’t just control the value of your money, but the access to your money and your privacy
- One of the advantages of cash is there is no one ‘following’ your spending at every single transaction
- Only 4% of the money in the UK is physically printed and minted, 96% is digital