Posted on Jul 30, 2015
Is another global financial crisis on the horizon?
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It's not just Greece, Puerto Rico and China. Debt is piling up around the world — stifling global economic growth and heightening the risk of more defaults and market turmoil..
World leaders are caught in a trap: More debt in the form of government and private spending is needed to stimulate today's sluggish economies. Yet the higher the debt, the greater the danger that a pullback by creditors will trigger another financial crisis like the one in 2008.
"The post-crisis world is a world of high debt, and it doesn't take much. It just takes a bad shock for the debt dynamics to go wrong," warned Olivier Blanchard, the International Monetary Fund's chief economist, as he forecast slower global growth this year, partly because of excessive debt.
"We have to be ready to see other episodes of this kind," he said, referring to the recent Greek default that shut down the country's banks and intensified fears of a Eurozone breakup until a new bailout was negotiated.
Although a new bailout proposal has quieted the Greek drama for the moment, a long-term solution for the euro area is hard to see. Governments have generally pursued one of two strategies since the global financial crisis, though neither has been notably successful.
Europe has largely slashed spending to get a control on government budgets, but the result so far has been minimal growth and high unemployment in Greece and some other countries.
The second approach, adopted by the U.S. and China, pumped hundreds of billions of dollars into all kinds of public projects. But growth in these economies, while better, has hardly been spectacular.
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Meanwhile, central banks around the world have cut interest rates and issued unprecedented amounts of bonds to spur borrowing and spending.
The result is that by the middle of last year, total global debt — government, corporate and household — reached $199 trillion, an increase of $57 trillion from the end of 2007, according to McKinsey Global Institute. That's about $27,500 for every person on the planet.
Read more at ...
http://www.latimes.com/business/la-fi-global-debt-20150729-story.html#page=1
World leaders are caught in a trap: More debt in the form of government and private spending is needed to stimulate today's sluggish economies. Yet the higher the debt, the greater the danger that a pullback by creditors will trigger another financial crisis like the one in 2008.
"The post-crisis world is a world of high debt, and it doesn't take much. It just takes a bad shock for the debt dynamics to go wrong," warned Olivier Blanchard, the International Monetary Fund's chief economist, as he forecast slower global growth this year, partly because of excessive debt.
"We have to be ready to see other episodes of this kind," he said, referring to the recent Greek default that shut down the country's banks and intensified fears of a Eurozone breakup until a new bailout was negotiated.
Although a new bailout proposal has quieted the Greek drama for the moment, a long-term solution for the euro area is hard to see. Governments have generally pursued one of two strategies since the global financial crisis, though neither has been notably successful.
Europe has largely slashed spending to get a control on government budgets, but the result so far has been minimal growth and high unemployment in Greece and some other countries.
The second approach, adopted by the U.S. and China, pumped hundreds of billions of dollars into all kinds of public projects. But growth in these economies, while better, has hardly been spectacular.
ADVERTISEMENT
Meanwhile, central banks around the world have cut interest rates and issued unprecedented amounts of bonds to spur borrowing and spending.
The result is that by the middle of last year, total global debt — government, corporate and household — reached $199 trillion, an increase of $57 trillion from the end of 2007, according to McKinsey Global Institute. That's about $27,500 for every person on the planet.
Read more at ...
http://www.latimes.com/business/la-fi-global-debt-20150729-story.html#page=1
Posted in these groups: 
Economics
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Economics International Affairs
Posted >1 y ago
Responses: 7
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Another? No. It's all part of the same ongoing one that's running in circles at 33 1/3 RPM like a bad disco album. New faces, new destinations but all part of the same downward spiral/
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the banksters weren't called to account for their actions - too big to fail has gotten bigger - the banksters are doing the same things that they were doing before,it's going to happen again - socialism for corporate failure, free market for the rest of us
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SSG John Jensen
if, after the 2008 crash, instead of giving lots of money to the banks, the Gov't gave 20,000 dollars to each American family at the same interest rates given to the banks. The buying spree would theoretically stopped a recession in it's tracks, because businesses would have to hire people to cover the demand of everything. The only thing the rich buy are more stocks which doesn't stimulate anything
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Without getting into huge macro inter-related issues and micro-transactions, yes there is likely a downturn coming. The market has been behaving similar to how it did in 2007 before the crash in 2008. Those I know who've been in the market for 10+ years believe it's likely to turn bear in the next 6 months. Maybe a year max. it's one reason why you keep hearing about the Fed wanting to raise rates. If the next crash happens and we're at 0% interest there is little to no room for the Fed to try to blunt the impact by lowering rates (unless we go negative like a lot in the EU have, which is bad). It's not likely to be caused by housing this time but there will be some impact there.
If this happens there will be a global impact. The recent bit with China is an example, and that was pretty much just a minor blip. Another example is the recent brief correction the market did in August. Everyone acted like the sky was falling and overall it wasn't that big of a change. Add in a real large correction/bearish downturn and the overall fear and irresponsible media hype and it'll be worse.
IMO the best thing you can do is try to educate yourself some, manage your own portfolio if you can learn enough (recently a lot of managers' direction was to do nothing thus causing people to lose instead of at least going to cash), and if not then if you see real indications of an overall downturn go fully cash.
Also, if it happens, be wary of money stagnating in a bank. I haven't been able to ferret out the details myself but I trust the source(s) I've heard it from. In a recent global financial summit (I think it was the G-20 in Feb 2014) one of the items agreed upon by Central Banks was that in the event of a financial crisis/run on the banks, all money in the bank belongs to the bank. Essentially once you deposit something it is no longer technically yours. This is due to the so-called insurance (FDIC or whatever it is now) only has enough to cover about 25% of all that's been deposited.
I'm not a doomsayer or someone saying you shouldn't use the system, just saying use it wisely. The market cycles about every seven years and since the last big drop was in 2008, do the math. Looking at charts over the years we're also sitting higher than it was for any of the previous large crashes, back to the Great Depression. So yep, all in all we're poised for a downturn. Be ready for it and save/invest accordingly.
Sorry to ramble, it's a touchy point. And the market being so sideways can be a royal pain to manage. :p
If this happens there will be a global impact. The recent bit with China is an example, and that was pretty much just a minor blip. Another example is the recent brief correction the market did in August. Everyone acted like the sky was falling and overall it wasn't that big of a change. Add in a real large correction/bearish downturn and the overall fear and irresponsible media hype and it'll be worse.
IMO the best thing you can do is try to educate yourself some, manage your own portfolio if you can learn enough (recently a lot of managers' direction was to do nothing thus causing people to lose instead of at least going to cash), and if not then if you see real indications of an overall downturn go fully cash.
Also, if it happens, be wary of money stagnating in a bank. I haven't been able to ferret out the details myself but I trust the source(s) I've heard it from. In a recent global financial summit (I think it was the G-20 in Feb 2014) one of the items agreed upon by Central Banks was that in the event of a financial crisis/run on the banks, all money in the bank belongs to the bank. Essentially once you deposit something it is no longer technically yours. This is due to the so-called insurance (FDIC or whatever it is now) only has enough to cover about 25% of all that's been deposited.
I'm not a doomsayer or someone saying you shouldn't use the system, just saying use it wisely. The market cycles about every seven years and since the last big drop was in 2008, do the math. Looking at charts over the years we're also sitting higher than it was for any of the previous large crashes, back to the Great Depression. So yep, all in all we're poised for a downturn. Be ready for it and save/invest accordingly.
Sorry to ramble, it's a touchy point. And the market being so sideways can be a royal pain to manage. :p
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MSgt (Join to see)
Also, as mentioned by one or two others, the fiat currency setup is stumbling. Signals and events are pointing to a new world reserve currency to replace the dollar and it'll likely happen in the next 5-10 years. Right now it seems the front-runner is the IMF's Strategic Development Currency (think that's it, the SDC). If it moves from a trading bond type of item as it is now to a reserve currency it'll include the Dollar, Pound, Euro, and two others at least (I think the Russian Ruble and Chinese Yenminbe (sp?)). The U.S. supports this route due to our stake in the IMF & the obvious points that the dollar is fading. Better to be part than to lose the whole. So if that happens expect in influx of cash. Remember everything recently printed? We'll get more than we can handle back so expect some hyper-inflation. So pray we get things going again before the next crash around 2022ish (if the pattern holds) or we're hosed.
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