Tue, 9th Oct 2018
Economists are warning that we are seeing the beginnings of another financial crisis - one that could be worse than the global meltdown seen in 2008.
The 2008 crisis was predicted by Ann Pettifor in 2006, and she is now predicting that the global economy is in danger again, thanks to rising corporate debt and rising interest rates. Global debt is currently three times the level of global GDP, and that debt is not going to be repaid. Eventually that level of debt will trigger a crisis. We are seeing companies that borrowed to excess at low interest rates now finding that the value of their collateral is being reduced, and their debt is rising. The interest on the debt is increasing as well.
The US Federal Reserve has opted to wind back the support it offers for the economy, and to reverse its quantitative easing. This could be laying the ground for a new crisis. There are crisis conditions in Argentina and Turkey, too.
Ann predicts that the next crisis will be worse than the previous one, because it is going to be difficult to pump out new quantitative easing and buy back assets. She believes that the UK is i a vulnerable state because of the economic volatility that is being caused by Brexit.
Ann is not the only person issuing warnings. Tom Russo, a former managing director at Lehman Brothers, also believes that the seeds of the next crisis are growing. He believes that leverage on corporate debt is a major sticking point, and that national debts are growing too rapidly too.