(Note: As the world watches the unfolding crisis in Greece with bated breath, here’s a look at other, perhaps lesser known trends that indicate a global financial crash is in the offing. Here’s a collection of articles by prominent economists and analysts that make that case. Some pieces are dated, but have been included here for their insight on the malaise plaguing the global financial system.)
World economy may be slipping into 1930s Great Depression problems: RBI’s Raghuram Rajan
The Economic Times
When Raghuram Rajan warned about a looming financial market crisis a decade ago, former US Treasury Secretary Lawrence Summers said he was being ‘Luddite’. In the event, Rajan was right. Now the Reserve Bank of India governor is sounding the alarm again — the very efforts of central banks in the developed world to avoid another Great Depression by keeping interest rates at zero may lead to precisely that outcome.
Has China’s Stock Bubble Popped?
Jesse Colombo, Forbes.com
China’s red-hot stock market fell approximately 25 percent in the past couple weeks due to increasing regulatory scrutiny and growing bubble fears. The 145 percent rally began last summer after the government further opened the nation’s equity market to foreign investors, and domestic retail investors have scrambled to get a piece of the action.
New Global Crisis Imminent Due To “Poisonous Combination Of Record Debt And Slowing Growth”
A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report warns.The 16th annual Geneva Report, commissioned by the International Centre for Monetary and Banking Studies and written by a panel of senior economists including three former senior central bankers, predicts interest rates across the world will have to stay low for a “very, very long” time to enable households, companies and governments to service their debts and avoid another crash.
The Coming Crash of All Crashes – but in Debt
Martin Armstrong, Armstrong Economics
Why are governments rushing to eliminate cash? During previous recoveries following the recessionary declines from the peaks in the Economic Confidence Model, the central banks were able to build up their credibility and ammunition so to speak by raising interest rates during the recovery. This time, ever since we began moving toward Transactional Banking with the repeal of Glass Steagall in 1999, banks have looked at profits rather than their role within the economic landscape.
The case for a global recession in 2015
Chris Matthews, Fortune
Optimists hope that an accelerating U.S. economy will have what it takes to drag the rest of the world out of the doldrums, as it has done during so many past recoveries. But David Levy, economist and chairman of the Jerome Levy Forecasting Center, argues that the problems of the rest of the world will end up taking the U.S. down, rather than the other way around.
Is a global economic recession coming? Copper price say ‘yes’
Debbie Carlson, The Guardian UK
The copper market crashed overnight to its lowest level since the middle of the financial crisis in 2008, fueling fears that the global economy is slowing more sharply than many experts had anticipated. Like oil, copper has a deep effect on the world economy because it is key for phone lines, cables and other infrastructure. It is also important to several world economies; the world’s largest copper producers, in order, are Chile, China, Peru, the US and Australia. The copper market is just the latest commodities market to suffer from a kind of panic, as oil prices have halved in just a few months.
Monetary Policy for the Next Recession
Clive Crook, Bloomberg View
By pre-crash standards, the big central banks have made and continue to make amazing efforts to support demand and keep their economies running. Quantitative easing would once have been seen as reckless. The world avoided another Great Depression. Yet even in the U.S., this is a seriously sub-par recovery; growth in Europe and Japan has been worse still. Now imagine a big new financial shock. It’s quite possible that all three economies would fall back into recession. What then?
The Liquidity Time Bomb
Nouriel Roubini, Project Syndicate
A paradox has emerged in the financial markets of the advanced economies since the 2008 global financial crisis. Unconventional monetary policies have created a massive overhang of liquidity. But a series of recent shocks suggests that macro liquidity has become linked with severe market illiquidity.
The Dollar Will Die with a Whimper, Not a Bang
The decline of the dollar as a reserve currency started in 2000 with the advent of the euro and accelerated in 2010 with the beginning of a new currency war. That decline is now being amplified by China’s emergence as a major creditor and gold power. Not to mention the actions of a new anti-dollar alliance consisting of the BRICS, Iran and others. If history is a guide, inflation in U.S. dollar prices will come next.
The Insatiable God
Another crash is coming. We all know it, now even David Cameron acknowledges it. The only questions are what the immediate catalyst will be, and when it begins. You can take your pick. The Financial Times reports today that China now resembles the US in 2007. Domestic bank loans have risen 40% since 2008, while “the ability to repay that debt has deteriorated dramatically”. Property prices are falling and the companies that run China’s shadow banking system provide “virtually no disclosure” of their liabilities.
Book Extract: The Ingredients Of A Market Crash
By John Hussman, Zerohedge.com