Thursday, July 28, 2016

The Pieces Are Falling Into Place
For Another Global Financial Crisis
Economist Satyajit Das sees several developments in countries around the world where debt challenges are mounting to crisis levels, all at the same time .. "Banks worldwide are highly leveraged, leaving them vulnerable to even a small loss, which can wipe out a significant amount of capital and increase the risk of insolvency. Now a new global banking crisis may be beginning; the pieces are falling into place. Exacerbating the danger is that in many advanced economies, banking systems are large relative to the real economy. They are vital in facilitating payments and supplying the essential credit that drives consumption, investment and government spending. Any disruption quickly results in a slowdown in the economic activity. Any new banking crisis likely will be significant. Banks are networked both domestically and internationally through inter-bank lending and derivative transactions. Problems at one bank can quickly infect others and spread across the financial system. Public finance problems follow as governments and central banks are forced to support banks to ensure continuance of essential payment and credit flows. The only guarantee at this point is that banking problems will remain a continued source of economic instability."
LINK HERE to the article

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