Royal Bank of Scotland brace for a full-fledged crash in global stock and credit markets

[keep_it_real]

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The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

Our macro economic road map is playing out - slow growth for longer, deep into 2009, with the pain spreading globally, gradually. People are beginning to wake up to the view that 2009 growth will be stagnant and weaker than 2008.

The twist however is inflation, and in particular how central bankers deal with this stubborn problem. The worry is that the ECB raises rates even as growth falters, leading to bigger cuts in 2009.

In the US, policy paralysis is possible, whatever the Fed jaw-boning. And in Asia, uncertainty reigns. All in all, a poor backdrop for risk assets and a sure fire recipe for higher volatility.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/bcnrbs118.xml