A credit crunch appears to be looming large as three key themes are set to unfold in rapid succession, according to Kevin C Smith from his firm’s independent research and proprietary models. Smith believes that overvalued long-duration financial assets are ripe for their next meltdown leg with the deluge of new US Treasury issuances hitting the market. Secondly, he foresees a powerful demand wave for gold from institutions as more central banks accumulate the monetary metal in preference over US Treasuries. Finally, he envisions a fiscal-stimulus-driven secular demand boom for commodities in G7 economies that could rival China’s commodity demand boom of the 2000s to help lead the world out of the looming recession and drive the next global economic expansion cycle. The creeping credit crunch is highlighted in the Dallas Fed’s recently published Banking Conditions Survey which revealed a drop in loan demand alongside a rise in non-performing loans and a deterioration in bankers’ outlooks for the future.
Credit Crunch Intensifies: Three Macro Events on the Horizon
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