The bank's credit team said markets were flashing stress alerts similar to the turbulent months before the Lehman Brothers banking crisis in 2008.
Craigs Investment Partners broker Peter McIntyre told the Otago Daily Times there was a ‘‘real threat of deflation'' looming for global economies but it was not a crisis.
Deflation had been talked about for about 12 months and there was a danger China would soon start exporting deflation to other economies.
The 1930s Depression was a crisis but this time the turmoil was not a liquidity crisis. It was a trade crisis.‘‘Banks are lending money and people are borrowing money. Things are getting cheaper and there is a lot of stockpiling going on with commodities in general.''People producing commodities needed to sell them and were offering them at whatever price someone would pay, he said. Many countries were putting off buying commodities because they believed the price would fall further.
Oil prices fell yesterday below $US30 ($NZ45.90) a barrel and RBS was warning major stock markets could fall by a fifth and oil might plummet to $US16 a barrel.
There were many geopolitical events taking place all at the same time, Mr McIntyre said.
Europe was likely to need to instigate more asset purchases to stimulate growth in its economy, the threat of Islamic State terrorism continued and China's economic slowdown concerned major investors who were trying to get their money out of China as the People's Bank of China devalued the yuan.
Chinese were now becoming some of the largest investors in Australia, New Zealand, Singapore and the United States as they sought to save their equity, he said.‘‘We've been here before. China's growth was even lower in the early 2000s.''
A positive factor this time was the health of the corporate world. Companies were initiating share buybacks and increasing dividends. The tension was going on to the balance sheets of countries which had been forced to reduce interest rates to create demand. The coming reporting season in the United States would give a guide to the strength of the US economy, Mr McIntyre said.
Despite the US markets falling at the end of the year, some sectors - healthcare, telecommunications and consumer discretionary - were outstanding performers. ‘‘The blood on the floor is from the commodity companies and reflects China's move from an export economy to one led by consumers.''The change in China's economic make-up was being seen in Dunedin, where geologists based in the city were seeing their contracts ended and were seeking work in different areas, he said.
RBS chief credit officer Andrew Roberts said in a note to clients global trade and loans were contracting, a nasty cocktail for corporate balance sheets and equity earnings. That was particularly ominous, given global debt ratios had reached record highs. China had set off a major correction and it was going to snowball.
Debt-driven expansion in China had reached saturation. The country now faced a surge in capital flight and needed a much lower currency, he said. The next leg of the rolling global drama was likely to play out fast and furiously.
The tightening cycle by the Anglo-Saxon central banks was already over. There would be no rate rises by the Bank of England before the downturn hit and the next action by the Federal Reserve might be a humiliating about-face and a rate cut, Mr Roberts said.
