Some market observers predict a global financial crisis in 2016-2017; one just as serious, if not more so, than that of 2008-2009. Writing for Institutional Investor’s Unconventional Wisdom column, Patrick Artus, Natixis’ Chief Economist, analyses the global economy today and discusses the potential triggers of the next crisis.
Signs of financial fragility have been growing since the spring of 2015. With a growing liquidity crisis and Brazil, China and various other commodity exporters experiencing economic turmoil, the stage is being set for another global financial crisis. However, despite these issues, the regulatory foundations built over the past eight years are resilient, and an economic crisis – if it does occur – will not stem from the same causes as those of 2008.
Artus argues that the Basel reforms have been read by many bankers as an extended mea culpa for getting things so grievously wrong before the crisis, which in turn have set a new era of stability. However, Natixis’ Chief Economist does speculate over the financial impact of a large, troubled country (such as Brazil) or a significant corporation – such as one in the US energy sector – going into default, which would lead to a rise in risk premia in the US and Europe. Indeed, the cause of the next financial downturn remains unclear, but what is certain is that the current global financial landscape may struggle to alleviate the economic effects should disaster strike.
To read Artus’ article, please click here.