Nobody can with any certainty predict when the next big share market crash will come. But it is certain that it will come and with an unerring accuracy rate of better than 85 percent over the past 17 years of observation, the artificial intelligence algorithms in my ShareFinder software predict that the next Johannesburg Stock Exchange crash will begin on October 7 2020. Hong Kong will follow on October 13, London on the 14th and, as the contagion spreads, Wall Street is likely to follow in June 2021.
According to UBS Global Wealth Management, a majority of rich investors expect a significant drop in markets before the end of next year, and 25 percent of their average assets are currently in cash, according to a survey of more than 3,400 global respondents. The US/China trade conflict is their top geopolitical concern, while the upcoming American presidential election is seen as another significant threat to portfolios.
South Africa is, however, likely to be blessed with a soft landing because the JSE has already been in steady decline since January 2018 having already lost 13 percent of its value with the result that much of the latent pressure has already been dissipated.
The world’s monetary system has reached an unprecedented, era-defining crossroads. At 320 percent, the debt to GDP ratio is the highest it has ever been in history and under its rapidly-rising burden the world monetary system is racing towards a collapse that is likely to decimate the savings of ordinary folk everywhere.
Having hit more than $250-trillion, the unprecedented amount of our global debt glut is underscored by the creeping presence of negative interest rates: a situation where the borrower, unbelievably enough, gets paid for borrowing. Although growing debt and the consequent stagnation of more and more global economies is resulting in soaring unemployment across the world with political polarization between the “Haves” and “Have Nots,” the inevitable consequence will be the resurgence of inflation which will only serve to heighten the pressure on families struggling to survive.
The US National Debt this year passed the $22-trillion mark and, based on the latest data, total private and public US debt has hit an astronomical record-high of $75.3-trillion, or a staggering 365 percent of GDP.
And a lot of other countries are in a far worse mess. As far back as 2012 Japan had passed 650 percent of GDP, Britain had passed 550 percent and the Eurozone 450 percent.
According to a CNN analysis, “The global balance of borrowings is over $250-trillion, nearly 320 percent of worldwide GDP and just shy of the all-time high it reached in the first quarter of 2018. That means, overall, the world is borrowing more than it is producing”.
The likely trigger event for the next global share market correction could originate in China where, in its rush to grow it has built far too many buildings, produced far too much steel and other commodities and made far too many bad loans. Its overcapacity is so pronounced that it will take years for demand to catch up with this oversupply.
Furthermore, China is compounding the problem by continuing to over-lend and overproduce though with diminishing returns. China’s non-government loans have grown almost a trillion dollars recently and yet they continue producing 40 percent more steel than the world needs.
In 2015, China’s stock market collapsed costing investors 45 percent of their savings. Now its economy is decelerating and its soaring private debt ratio has reached 300 percent of GDP signalling the inevitability of a further economic slow-down.
The Chinese are taking a problem whose size and scope is unprecedented and making it all that much bigger. So here it is worth turning to China’s Asian neighbour Japan, where a not too dissimilar process led to very high GDP growth in the 1980s. Fueled primarily by runaway lending, Japan suffered a stock market crash in 1990, then a real estate collapse in 1991, and finally a bank rescue in 1998. And Japan has posted 21 years of near-zero growth since that rescue.
Even if it can avoid catastrophic collapse, China’s economic trajectory is to continue slowing, resulting in downward long-term pressure on commodity prices. Deflation will inevitably spill over to countries that are economically intertwined with it in the Asia Pacific region, such as South Korea, Australia, Thailand, Vietnam, Singapore, and even Japan as well as Africa and South America which will be profoundly impacted because both continents are disproportionately dependent on commodity exports.
Deflation, following a long period of uncontrolled monetary expansion, was, of course, what caused the Great Depression.
Nobody can pick the date of the probable collapse, so I have opted for October 2020…. because the most devastating share markets events in the past have happened in October. But there is no other argument to justify it. Neither can anyone pick the year with any certainty except to note that unless we take drastic steps to correct our towering global debt imbalance, collapse must come sooner or later and sooner seems more likely than later….and my uncannily accurate ShareFinder software has picked October 7 2020 until the following April for the next bear market.
If I am wrong, then October 7 is likely to prove to be a dress rehearsal for the big event which is certain to come soon for it is virtually certain that there is now nothing the world’s monetary authorities can do to defuse the fast-ticking time bomb that they, through their uninhibited expansion of the global credit system, have created for an unprepared global population.
It is anyone’s guess as to the likely impact of a global economic melt-down but for the continent of Africa, the scene is already being set for a new phase of colonialism. Russia is now the largest supplier of weapons to Africa; it has military co-operation agreements and deals for military and police training with more than half of African nations; and a series of nuclear technology deals with Egypt, Rwanda, Ethiopia, Uganda and Zambia.
While the Kremlin has consistently denied any links, a shadowy organisation known as the “Wagner Group” which was deeply involved in the Syrian war in support of Russia’s mission to shore up Syrian President Bashar al Assad’s campaign against ISIS and formed a significant part of the force that annexed Crimea from Ukraine, has spread its influence across at least 20 African governments. In Libya, Wagner forces are fighting in support of the rebel General Khalifa Haftar and in the Central African Republic it took on the Islamist Seleka rebels. It is, in fact, an undeclared branch of the Russian military.
Apart from being involved in hard combat, the Wagner Group is providing weapons training, supports police and civilian intelligence services and provides security protection for Russian personnel.
A former KGB operative now based in the West described Wagner’s meteoric rise in Africa as one of the most successful GRU (Russian military intelligence) operations of all time.
The spread of Russian influence throughout Africa took on new significance recently when Russian President Vladimir Putin hosted 43 African heads of state at the Black Sea resort of Sochi in an exhibition of Russian soft power in October….and without any explanation then or since two Russian nuclear bombers touched down at South Africa’s Waterkloof airforce base!
Here in South Africa, Russia is believed to be providing “backbone” for those involved in the sinister fight-back against President Cyril Ramaphosa’s efforts to wipe out corruption.