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GEAB 121 GlobalEurope Panorama 2018 – Financial Blues (fragments)

Reinforced by the 75% success rate of our 2017 anticipations, our team presents in this January issue of the GEAB, 5 structuring trends and 33  “Up & Down 2018” anticipations. Here are some financial related fragments we selected for you.

Many more topics are covered in the full version (available upon subscription) of this GlobalEurope Panorama: finance (inflation, QE, Eurozone, interest rates, Fed …), investments (gold, oil, sand …), economy (Construction sector, large companies, growth, employment, Africa …), currencies (dollar, euro, yuan), geopolitics (Koreas, Iran, South America, Russia …), public opinion (poverty, longevity, radicalisation …), politics (populism , regulation, monitoring, Trump, Putin, May …), technologies (Bitcoin, Airbnb, …), etc …

One structuring trend – The existential crisis of the financial sector (fragment taken from the Panorama 2018)

The end of easy money related to that of the monetary easing policies, will put the game of competition back on track after years of public support for dominant economic forces. It also announces a cleansing of the economic field. By 2018, some spectacular corporate bankruptcies could send significant shocks to the financial markets.

But generally speaking, we estimate that the year will be a difficult year for the financial world; it will enter a period of existential crisis, following the countless excesses and failures of the last decade. Over this decade, the financial world remained indispensable in providing solutions and the monetary easing policies in particular have enshrined this centrality.

fig01Figure 1 – Americans who have “almost no confidence” in Wall Street, 1998-2017 (Cato Institute)

But all that is being put to a stop: back to real economy, end of QE. Questions about imbalances that has been created by this system of “making money with money” (which is a way of summarising the mission of banks and financial centres), will begin to arise.

Indeed, common sense could only be appalled by the madness of the financing system of the economy that these ten years of crisis have staged. Until now, all the heights of money have been experienced concretely and in the eyes of all. Everyone knows now that money can be created (QE), that the worst debts are sustainable (US debt) and that we can create value virtually and ex nihilo (Bitcoin). In the medium term, such revelations cannot remain without effects. Especially in a context of global village in which important players (China) are working to invent a real global currency (a global euro) that would sound like the end of exchange rate-based finance and would start eliminating any notion of intrinsic value to currency. We are talking of slow trends which will settle over the next 10-20 years.

Closer to us, in a world moving back to economic realities, it is the search for monetary stability that takes the upper hand rather than speculative potential. Banks have been reined in. It is possible that we will start seeing the first strong initiatives to also rein in financial markets in 2018. The current raving valuation of stock market assets is very much like that of Bitcoin[1] and could lead to the same regulatory reactions… not before a gigantic profit-taking took place