Bernard Connolly is one of the very few prophets who foresaw both the Great Recession and the eurozone sovereign debt debacle. After a long silence, he is again issuing warnings.
If you want an idea of how the current fiscal and asset bubble in the US might end, pay close attention to Bernard Connolly, esteemed consigliere to hedge funds and central bankers across the world for the last quarter-century.
His blistering critique over the decades has not stopped top officials at the Fed, the Bank of Japan, and the Bank of England from seeking his advice whenever trouble hits. After a long silence, he is again issuing warnings. This points to an initial rate cut in June, followed by cascading cuts in rapid succession – though still too little, too late. The Fed Board is already preparing for a hand-brake U-turn. Governor Adriana Kugler recently reminded everybody that theDays earlier, New York Fed chief John Williams said the supply-side shock of the pandemic had blown over and that US inflation had carved out a near-perfect round trip, “like the Apollo missions to the moon and back.
Such modest growth is thin gruel for an economy running a wartime $US2 trillion fiscal deficit at the top of the cycle. So what will happen this year as the caffeine fades and the fiscal impulse turns negative?running through Connolly’s book is that central banks have created a chronic “intertemporal” misalignment in Western economies, starting with Alan Greenspan in the 1990s.
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