HSBC is the world’s largest bank outside of the U.S. and China, the largest in the UK, and the 9th largest bank in the world overall.
HSBC’s chief economist Stephen King wrote today in a note to clients:
The world economy is like an ocean liner without lifeboats. If another recession hits, it could be a truly titanic struggle for policymakers.
Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.
King points out that – notwithstanding 7 years of extraordinary measures by the Fed and other central banks – Treasury yields haven’t risen, the budget deficit isn’t falling, and welfare payments are still rising.