(NZ Herald) - A financial expert has sparked fears with the grim prediction that inflation, slowing growth and labour shortages are here to stay.
Last week, British billionaire investor Jeremy Grantham made headlines after claiming the US was now in the middle of a "superbubble" – and that a historic share market crash was looming.
Now, he's gone a step further, telling Bloomberg that the world had enjoyed a "Goldilocks" period of relative economic stability for the past quarter of a century – but that the good times were now ending.
"There's only a certain amount of cheap oil, cheap nickel, cheap copper, and we are beginning to hit some of those boundaries," Grantham said in an interview with Bloomberg.
"Climate change is coming with heavy floods, serious droughts and higher temperatures – none of these make farming easier.
"So, we're going to live in a world of bottlenecks and shortages and price spikes everywhere."
He said that gloomy outcome was driven by a range of factors including a lack of raw materials, falling birthrates and increased global tensions.
It comes as the world has battled severe supply chain disruption for months on end, with everyday items like electronics, cars and even groceries growing increasingly difficult to source.
It also comes amid growing inflation concerns, with many economists predicting the Reserve Bank of Australia may have to raise interest rates this year – far earlier than expected – to tackle rising inflation, while the US Federal Reserve is also tipped to raise rates in March for the same reason.
Grantham, the founder of investment and asset management firm GMO, also said environmental disaster would also wreak havoc with the global economy.
"We have simply shot way beyond the long-term capacity of the planet to deal with us," he continued. "Nature is beginning to fail. And in the end, if we don't fix that, we begin to fail as well."
The 83-year-old's latest comments come after Grantham last week claimed in a lengthy note published on his company's website that it was all but inevitable that the S&P500 will plummet by almost 50 per cent, even if the US Federal Reserve steps in.
He said the US was now in the midst of its fourth ever superbubble, following previous bubbles in 1929, 2000 and 2008, but that a crash was coming.
"This time last year it looked like we might have a standard bubble with resulting standard pain for the economy," he wrote.
"But during the year, the bubble advanced to the category of superbubble, one of only three in modern times in US equities, and the potential pain has increased accordingly.
"This checklist for a superbubble running through its phases is now complete and the wild rumpus can begin at any time.
"When pessimism returns to markets, we face the largest potential markdown of perceived wealth in US history."
He explained at the same time, the US had experienced very low interest rates, high bond prices and bubbles in housing, commodities, stocks and bonds.
By Alexis Carey
27 Jan, 2022
