Central banks are tasked with maintaining a country’s economy. However, BlackRock officials are convinced these institutions are up to nefarious things. They expect an even bigger recession following the banks’ actions.
BlackRock Express Grave Concerns
There are serious concerns over the current economic state of the world. All countries are struggling; the Russia-Ukraine war continues, China and India had a recent spat, and inflation remains rampant. There is nothing to be optimistic about, and the U.S. economy may be under more pressure in 2022. However, if BlackRock officials are to be believed, the rest of the world will see an “unprecedented” recession reasonably soon.
The world’s largest asset manager sounds the alarm and points a finger of blame at central banks. The team identifies central banks as the root cause of recessions in a new report. More specifically, these institutions engage in “overtightening policies” to “bring prices under control again”. It is difficult to revert inflated prices, yet overtightening can lead to an even bigger squeeze.
Under normal circumstances, a central bank intervenes when the economy struggles. Those measures are short-term and traditionally suffice to get the momentum rolling again. However, the expected recession by BlackRock may prevent the Fed or similar institutions from addressing the situation. Assuming that is true, the outlook is very bleak for all investors and investments.
Markets likely to take a big hit include stocks and cryptocurrencies. The year 2022 has been brutal for both markets, yet 2023 may not offer any relief either. As a result, hedging against future financial loss will become paramount, yet the options are limited. The report mentions wine and other spirits, as their demand is unlikely to decline in the years ahead. Real estate may also be valuable, as people will always need places to live.
More Volatility Lies Ahead
The report by BlackRock paints a very bleak outlook for the global economy. However, it isn’t entirely surprising either. Everything has become a lot more expensive, and key goods are far scarcer than before. Unless officials can resolve the key conflicts in the world quickly, that situation will not improve either. Moreover, economic trouble is only one issue. One shouldn’t overlook the mental consequences of this growing uncertainty either.
Overall, there is little reason for optimism heading into 2023. Although the report makes things look a tad bleaker than they should be, the concerns remain valid. Central banks contribute to the current economic problems and they have run out of viable solutions. A new course of action is required, but that is easier said than done.