Beware the great 2016 financial crisis warns leading City pessimist as RBS says ‘sell everything’

The City of London’s most vocal “bear” has warned that the world is heading for a financial crisis as severe as the crash of 2008-09 that will prompt the collapse of the euro zone.

Societe Generale strategist Albert Edwards said the West was about to be hit by a wave of deflation from emerging market economies and that central banks were unaware of the disaster about to hit them. His comments came as analysts at Royal Bank of Scotland urged investors to “sell everything” ahead of an imminent stock market crash.

“Developments in the global economy will push the US back into recession,” Edwards told an investment conference in London. “The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed.”

Fears of a second serious financial crisis within a decade have been heightened by the turbulence in markets since the start of the year. Share prices have fallen rapidly and a slump in the cost of oil has left Brent crude trading at barely above US$30 a barrel.

“Can it get any worse? Of course it can,” said Edwards. “Emerging market currencies are still in freefall. The US corporate sector is being crushed by the appreciation of the dollar.”

He said the US economy was in far worse shape than the country’s central bank, the US Federal Reserve, realised. “We have seen massive credit expansion in the US,” he said. “This is not for real economic activity, it is borrowing to finance share buy backs.”