A well-known economist shows the reasons why Europe is facing the worst economic crisis of all time. How to prepare?

Unhappy times have been upon us for the last few months. It is even more depressing when someone comes along with the view that the worst is yet to come. Can one imagine a more unfavourable situation and circumstances than war, massive inflation and an economic and energy crisis? Unfortunately, the Finnish economist Tuomas Malinen comes up with the idea that it is possible. He even claims that the European crisis is 'much, much worse than anyone even realises'.

Tuomas Malinen argues that the worst is yet to come. Source

The situation is serious. But what makes an economist think it could get drastically worse? That's what he described on his Twitter account.

I'm telling you that the situation in Europe is much worse than many people realise.

That's how he opens his message in a tweet on Wednesday this week. The whole first part reads as follows:

I am telling you people that the situation in #Europe is much worse than many understand.

We are essentially on the brink of another banking crisis, a collapse of our industrial base and households, and thus on the brink of the collapse of our economies.

So they are saying that we are essentially on the brink of another banking crisis, a collapse of our industrial base and households, and therefore on the brink of the collapse of our economies.

I will try to translate the tweets further.

Link to the original thread here:

https://twitter.com/mtmalinen/status/1567435886165360641

The second part continues:

We are also completely at the mercy of the authorities and know very little of what they are planning. Will they succeed in stopping the onset of the banking crisis again? I don't know, but I doubt it.

So I confess that this already seems to me to be a little tinged with a particular strand of opinion. Anyway, what he writes in the next section makes it even more scary.

  • The rate of deterioration is now enormous and it's only a matter of time before it's written into the market. I bet we have a few more weeks (months at most) before the chaos really begins. Take precautionary measures. It will come in handy:
  • 1. Cash.
  • 2. Food.
  • 3. 2.
  • 4. Wood (if you have a stove).
  • 5. Other necessities.

This is the part that, without further explanation, would really sound a bit comical coming from an informed economist. Fortunately, he lets his foot off the gas a bit in the last section and takes his statement to relatively more reasonable ends.

Preparation doesn't hurt if by some miracle we avoid the onset of a complete economic collapse. All we need is more cash (no meaningful interest in the banks), food, water and wood.

So I consider it more of a bit of a fad, intended mainly as a warning alarm for people who underestimate the current situation. Sure, being prepared doesn't hurt, but it's the addition of having cash that I consider essential. And that's because of the market downturn, which in turn is a very real possibility. That there should be a war for food and water in Central Europe is really, I hope, an exaggeration and something we won't see.

I would just add that Tuomas Malinen, PhD in economics, is the CEO and chief economist of GnS Economics. He is also an associate professor of economics at the University of Helsinki. He studied economics at the University of Helsinki and at New York University. He specialises in economic growth, economic crises, central banks and the business cycle. Tuomas is regularly consulted by political leaders in Finland and is frequently interviewed by local and international financial media. Tuomas is currently writing a book on how financial crises can be predicted.

So there is probably no need to mention that this is just some unsubstantiated fad by a noname person on the internet.

So what is likely to happen?

So what is the likely macroeconomic scenario? I have described the economic mechanics I expect to see in Europe in the months ahead here: Government or Putin? Here's the answer to the question of who is to blame for expensive energy and gas

But the short version is this - the expensive energy is mainly due to the Russian gas supply shortfall, fear of war and general market jitters, and the drought that forced some (especially French) nuclear plants to shut down. The drought has also made it difficult to ship coal to combustion plants. It's just that our energy was already one of the most expensive globally before all this. This meant that we were a very lucrative and exclusive customer for exporters. It is therefore to be expected that suppliers will be looking for ways to supply Europe with a hundred and six energy.

Unfortunately, it is not a matter of moments and it will take time. Then the market balance between supply and demand will also have to be re-established. More or less the same applies to gas.

However, this balance is likely to be interfered with by governments that need to act quickly and have therefore decided to consider capping energy prices. This will, of course, play a big role. For the time being, however, it is difficult to predict what this will look like.

https://www.youtube.com/watch?v=NlbgRhdt89I

Is the situation drastically bad?

Tough question. I guess it depends on each individual's perception. What we do know for sure is that, according to the indicators, it is definitely not good.

While there has been some easing of price pressures, they remain high and the European Central Bank is under pressure as inflation is more than four times its 2% target and hit a record 9.1% last month.

European inflation is still rising. Source

So it faces the prospect of aggressively raising interest rates just as the economy is entering a downturn. Rising borrowing costs would add to the woes of indebted consumers. Unfortunately, it looks like there will be a sharp increase of 50 or 75 basis points.

The situation surrounding the war and Russia is not going well either. Negotiations are at a standstill and any easing is probably out of the question. On the other hand, at least this will catalyse the creation of backup sources and suppliers of gas. There is nothing else to do.

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Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and a few other analyses. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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