"Something Biblical Is Approaching" - Here Are The Scenarios Of The Collapse | Zero Hedge
https://www.zerohedge.com/news/2019-01-11/scenarios-collapse-world-utterly-unprepared
Scenario I: Global Depression
In a depression, everything that has been driven the economic expansion goes into reverse. Asset markets experience severe contraction (in excess of 50 percent), credit becomes restricted, corporations and households de-lever fiercely, and global trade flows stall (for more details see Q-review 2/2018). GDP falls dramatically, between 10 to 25 percent. Unemployment skyrockets. The standard means of stimulus by central banks and governments are exhausted without any notable improvement in the economic environment.
The implosion of the current asset bubble will start a relentless unwinding of leverage and risk in the global financial system. Because major central banks are still “all-in” with rates pinned at or near historic lows, and balance sheets bloated to extreme levels, their ability to respond will be highly restricted. Governments are also highly-indebted, and when interest rates rise, some sovereigns are likely to default, aggravating the global banking crisis, which will probably be in motion already. Combined with the zombified global business sector and a hard landing in China, these factors will lead the world economy into a depression. However, a possibility of something even more ominous is lurking in the background.
Scenario II: Systemic Meltdown
Systemic crisis would mean that the global financial melts down due to an existential deficit of trust between counterparties within the system. Before 2008, a systemic meltdown was mostly a theoretical construct. However, in mid-October in 2008, global leaders were faced with the possibility that banks would not open on Monday. The interbank markets had frozen, because no one knew the amount of the losses banks carried on their books. The global financial system was grinding to a halt. Politicians and central bankers saved the day by guaranteeing bank deposits and by providing capital and extraordinary guarantees to keep the important financial institutions standing and credit flowing.
Now the problem is that many of these measures are already in play and when the next crisis hits, the solvency of governments and central banks will also be in question. This creates a perilous situation because, for example, the shares of the global systemically important banks, G-SIBs, have been falling since the beginning of last year, which was also the time when the balance sheet normalization (QT) program of the Fed kicked into full gear. This is no coincidence and it implies that troubles are, once again, brewing in the banking sector.
Because a crash in the asset values would affect the collateral of banks and because global depression would lead to a massive increase in loan losses, the already-impaired banking sector could, again, face collapse. However, this time around, there is very little authorities can do to stem the panic. These factors make the systemic meltdown an ominously-likely scenario.
Systemic meltdown would mean that all banking actions, distribution of money, loans, swaps, banking services, etc., through the banking sector would stop. Credit cards would cease to function, ATMs would not give out money and loans could not be originated or rolled-over. Following the likely collapse of global trade, the world economy would also collapse. This would imply that the global GDP would experience a harrowing fall of 20 to 40 percent. Modern societies would cease to exist in their current form.
Scenario III: The fairy tale
Could this all be averted somehow? We’ve been pondering this for two years now, and our resounding answer is no. The leverage in the system usually results in a crash at some point, and asset bubbles very rarely deflate in a controlled manner. However, CBs can probably still postpone the inevitable, if they could re-start QE programs or find some other way to push artificial central bank liquidity into the financial markets.