For the full list of Saxo's 2019 Outrageous Predictions, click here.
From Ancient Babylon to 1930s Europe, debt jubilees have been far more common
than most of us may realise. As demonstrated by economists Carmen Reinhart and
Ken Rogoff in their seminal work “This Time is Different: Eight Centuries of Financial
Folly”, restructuring and write-offs have also played important roles in resolving
Contrary to what the Greek debt tragedy seen since 2010 would suggest, debt
forgiveness has been very common in Europe. In the interwar period, jubilees swept
across Europe to the tune of 50% of GDP for France, 36% of GDP for Italy, and 24% of
GDP for the United Kingdom.
In 2019, the unsustainable level of public debt, a populist revolt, rising interest rates
from European Central Bank tapering/lower liquidity and sluggish growth reopens
the European debate on how to get ahead of a new crisis. Italy is the key bellwether
as it faces a massive maturity wall set to reach around €300 billion in refinancing
over 2019 as interest rates spike. Quickly, Italian contagion sickens Europe’s banks as
the EU lurches into recession. The ECB resorts to new TLTRO and forward guidance
to limit the carnage, but it’s not enough and when contagion spreads to France,
policymakers understand that the EU faces the abyss.
Germany and the rest of core Europe, which refuses to let the Eurozone fall apart,
have no other choice than to back monetisation. The Economic and Monetary Union
extends a debt monetisation mandate to the ECB for all debt levels over 50% of
GDP and guarantees the rest via a Eurobond scheme while moving the controversial
Growth and Stability goalposts.
A new fiscal rule allowing the first 3% of GDP in deficits to be mutualised in 2020 is
adopted by EMU countries, with everything beyond subject to a periodic review by the
European Commission linked to the state of the EU economy.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.