Citigroup: Oilmageddon! Global Economy in a ‘Death Spiral’

From Eric Levitz writing at New York magazine:

Weeks after the Royal Bank of Scotland advised its investors to “sell everything,” Citi has decided to provide its own clients with fodder for a panic attack. In a report released Thursday, the bank warned that the global economy appears to be “trapped” in a “death spiral.”

Here’s a thumbnail sketch of the deathly cycle that Citi forecasts: Weak global growth spurs demand for the U.S. dollar; a stronger U.S. dollar drives down the global price of commodities; and low commodity prices hurt developing economies dependent on exporting raw materials, thereby weakening global growth, which spurs demand for the U.S dollar, ad infinitum. This process repeats until we arrive at “Oilmageddon,” an economic apocalypse defined by perpetually low oil prices and “a ‘significant and synchronized’ global recession and a proper modern-day equity bear market,” writes Citi strategist Jonathan Stubbs.

Crude-oil prices have collapsed by 70 percent since mid-2014, while the U.S. dollar has risen by 20 percent against foreign currencies, according to CNBC.

Read the rest of the story at New York Magazine.