The planet’s biggest economy is showing worrying signs that it’s set to crash, according to James Garrick, economist for Legal and General Investment Management (LGIM).
The investment firm looks after millions of pounds worth of British pension savings and has now started to reduce risk amid “signs that things are going wrong,” said Mr Garrick.
He issued a similar warning over the American economy in December 2007 and sees a likeness in conditions then and now.
The expert believes the US economy could start deteriorating next year, and be in a full-blown recession by 2018.
Separately, global think tank the OECD today also warned the US outlook had dimmed and cut growth forecasts to 1.8 percent this year, from its previous forecast of two per cent.
Speaking to journalists today, Mr Garrick said the corporate credit cycle has turned “vicious”, with weaker growth and lower corporate profits – off the back of both low oil prices and China’s slowdown – now filtering through into a rising number of defaulting loans or so-called delinquencies.
Mr Garrick warned of a “snowball effect” where issues start small and slow, before picking up pace and spiralling out of control.
It means the more ‘delinquencies’, the more banks will start to toughen lending conditions, which in turn will hit growth and profits even harder. Continue reading