Wellington-Altus Private Wealth’s chief market strategist, Jim Thorne, has issued a grim warning about the global economy’s state, suggesting an imminent collapse.
According to Thorne, the potential economic downturn stems from what he referred to as a lack of fiscal discipline over the past two decades, resulting in unsustainable debt-to-GDP ratios, he said during an interview with David Lin published on April 12.
Thorne underscored the severity of the situation, particularly in the United States, where the debt-to-GDP ratio has surged to levels not seen since World War II.
Picks for you
The expert outlined his forecast for monetary policy, anticipating an increase in the Federal Reserve’s funds rate and the Bank of Canada’s interest rates. He emphasized the importance of unburdening the yield curve and providing stimulus to the private sector to avert a severe economic downturn.
“We are going to have a severe economic slowdown, which looks like it’s going to manifest in 2026. Long and variable lags of monetary policy 12 to 14 months if we’re lucky,” he cautioned.
Existing economic red flags
Additionally, the strategist pointed out the daunting challenge facing the U.S. in refinancing its debt over the next five years, which he deems unfeasible given the current economic trajectory.
Moreover, Thorne raised red flags about the viability of social welfare programs like Social Security and Medicaid, stressing that the math simply does not add up. He warned that without rational policymaking and intervention from central banks, the U.S. could face a catastrophic scenario, possibly marked by a failed bond auction, which could trigger widespread economic turmoil.
“If we don’t get some rational thought in the Central Bank world and in the policy world then specifically there’s probably going to be a failed bond auction in the United States and if that happens all heck’s going to be break. <…> The fact that growth is really only predicated on government spending we are in an economic mirage,” he said.
‘Deceptive statistics’
It is worth noting that Thorne’s previous warning centered around what he termed as the deceptive nature of statistics such as the Consumer Price Index (CPI), pointing out that certain components, like owner’s equivalent rent, mask the true inflationary pressures.
In this case, he criticized the reliance on lagging indicators within CPI, such as the Motor Vehicle Insurance index, as misleading representations of underlying economic realities.
In the meantime, amidst ongoing economic uncertainty, commodities such as gold are reaching new heights. Notably, according to a report by Finbold, as gold prices surge, there is a noteworthy divergence between the precious metal and US Treasury yields.
Overall, Thorne’s warnings coincide with investors wary of geopolitical tensions, inflationary pressures, and the sustainability of economic growth.
