RBS Warns of Upcoming Economic CrisisBy Adam Teen | Wednesday, January 13th, 2016
The Royal Bank of Scotland, which is one of the biggest banks in the UK warned investors that the year 2016 will be a ‘cataclysmic year’ for the stock market and that it could fall by a fifth and that oil prices could go as low as $16 a barrel. Those who follow latest markets developments and see the warnings of the coming of global deflationary crisis will most likely completely agree with RBS.
On an even scarier note the RBS has reportedly said that ‘This is about return of capital, not return on capital. In a crowded hall , exit doors are small.’ It’s also important to indicate that the Royal Bank of Scotland made a similar comment right before the financial crisis in 2008.
In their warning the RBS makes an excellent point that this upcoming global crisis will be about the return OF your money and not ON your money. In other words, as an investor you will be fighting to get your invested money back, not the dividends from your investment.
A recent situation in Greece comes to mind when during the crisis banks blocked accounts of millions of people. In 2013 a ‘bank bail-in’ legislation in Cyprus allow the banks to take 50% of all big depositor’s funds. People were shocked and the banking system was shuttered as public’s trust has been completely lost. Unfortunately similar capital controls have been propagated throughout Europe after similar ‘bank bail-in’ legislation has passed on the 1st of January 2016.
In times like these buying stocks can be very risky. In fact any long-term investment can be fatal in an unstable financial market. Investors were advised by the RBS to get rid of stocks as they may fall substantially.Published in News & Analysis