Ringside seats as the global economy crashes.

Writing for Bloomberg, financier Mohd El-Erian says that markets are unable to react to uncertainties. Stock markets hate uncertainty and the world is full of uncertainties at present. What are they? The greatest unknowns are in Europe. Britain will trigger Article 50 of the European Union by the end of March next year, which will start a process of separation lasting not more than 2 years. People are bracing for a "hard Brexit' because Europe cannot allow Britain to set a precedent which may lead to a break up of the union. Italy is to hold a referendum in December on constitutional changes, which could decide the fate of the Prime Minister, Matteo Renzi, and Chancellor Angela Merkel looks shaky in Germany. Only the US looks certain as Donald Trump seems to be looking at a whitewash. However, for those of us outside the US the prospect of a Hillary Clinton presidency is filled with dread. She is inextricably bound to Obama's foreign policy, which is built on supporting terrorists described as 'good', while using drones to indiscriminately assassinate those considered 'bad'. Central banks have been supporting markets through zero, even negative in some cases, interest rates but these are becoming increasingly futile. Interest rates at virtual zero lead to increased borrowing. The International Monetary Fund is warning that total debt in the world has reached $152 trillion, two-thirds of it in the private sector. Global GDP at current prices is around $80 trillion. Trouble is that most of the money is going into financial products and not into investments which means that economic growth, especially in developed countries, remains weak. Central banks are unable to exit these unconventional monetary policies in case they cause a collapse of markets. In desperation central banks are buying corporate bonds, essentially supporting a market bubble. The global economy seems stuck in a low growth scenario, mainly sustained by growth in developing countries, which could be around for many years. If you are already growing slowly any further slowdown could result in panic and a crash. That is what some are predicting. Bond prices are so high that yields have turned negative. Around $10 trillion worth of bonds of advanced economies are trading at negative yields. Central banks are running out of bonds to buy to continue with quantitative easing. How to get out of the zero interest rate scenario without causing a crash? The IMF is suggesting an increase in fiscal spending, which will be mainly in infrastructure. In the US, where unemployment is already low, a fiscal stimulus will result in wage inflation and an eventual increase in interest rate. The crash will be postponed but is certain come. Economists can only suggest, politicians have to act. But they cannot, because of fear of losing elections. We can only be spectators.