The world economy will face a crisis in the next two years even bigger than the downturn currently buffeting the global financial system, a
Author Harry S. Dent, who predicted
AFP reports Dent saying that the Western baby-boomer generation is set to cut back on spending, a move that will send the share and property markets into downward spirals that would dwarf the recent recovery.
“We’re in the middle of a bear market rally,” Dent told the Australian Broadcasting Corporation.
He said share markets were likely to continue to gain in the next few months but would fall again towards the end of the year as the global banking system suffered another meltdown, bottoming out in 2011.
Dent says post-war baby boomers in the Western world are spending less as they aged, in a long-term demographic shift similar to that seen by
“Peak spending is age 46, so we’ve been saying for decades, we’re going to have this great, great boom and then around the end of this decade baby boomers are going to peak in spending, prepare for retirement,” he said.
“(Their) kids are going to leave the nest and the economy’s going to slow just like
Reuters reports his gloomy forecast adds to a chorus of voices cautioning against expectations of a rapid rebound from the global crisis.
The world economy is struggling to overcome problems stemming from last year’s housing and financial market meltdown, with access to credit still tight, companies reluctant to spend and job losses mounting.
Around the world, governments and central banks have been cutting interest rates to record lows, buying financial assets and building infrastructure to prop up growth and encourage consumers to spend.
Both the World Bank and the Organization for Economic Co-operation and Development offered dispiriting assessments of the world economy overnight, adding to concerns about the economic outlook that has scuppered a rally in equity markets.
Wall Street suffered its worst one-day loss in two months yesterday, with the S&P 500 sliding 3% and into negative territory for the year.
Asian markets followed suit this morning, with
MSCI’s World Index had soared almost 50% from its March low until early this month, raising concerns that markets had been too aggressive pricing in a recovery and prompting investors to book profits ahead of the traditional summer lull. The index is now more than 7% off its early June peak.
Prices for oil and industrial metals also gave up ground as investors questioned the strength of the recovery.
“I do not think there is anyone who is all that confident about an economic recovery,” said Hiroaki Osakabe, fund manager at Chibagin Asset Management in