preface
A series of worrisome cycles of doom will soon trigger a new global financial crisis.
On September 15, 2008, at 1: 00 a.m., after the last 63 hours of panic, psychological struggle and multi-party meetings, CEO Richard Fuld (Richard S. Fuld) stepped out of the Lehman headquarters building and faced the coming media. Read out a board decision: Lehman Brothers filed with the Federal government for bankruptcy Protection Act No. 11-from this moment on, Lehman surpassed the bankruptcy of de Zon Securities in 1990 to become the largest investment bank bankruptcy in American history. And it was the beginning of a bigger global financial tsunami a decade ago.
On the tenth anniversary of the collapse of Lehman Brothers (Lehman Brothers), when people were almost oblivious to the pain of the doomsday financial disaster of that year, Dr John Lourlin (John Llewellyn), a former chief economist at the failed US investment bank, made a startling prediction at an OECD (OECD) event last month.
During the forum, he said the world is now facing a new round of economic meltdown, now "not only serious, but also growing."
Greed, debt at "record highs", "irrational prosperity" and low interest rates have pushed the world to the brink of the financial crisis.
The United States is facing huge fiscal deficits, China is pursuing easy fiscal and credit policies, and Europe is still on the road to recovery. Banks are now better capitalised, but still not sound enough. European banks, for example, can still retain their own country`s sovereignty debt without providing it with any capital, maintaining the potential "bad luck cycle (doom loop)" between them.
Ten main inducements for a financial crisis to erupt
First, there is a "shelf life" in the current fiscal stimulus, which drives America`s annual growth rate above its 2% potential. By 2020, the stimulus will run out, and a modest fiscal drag will lift growth from 3% to just under 2%.
Second, because of the timing of the stimulus package, the U.S. economy is overheating and inflation is higher than expected. As a result, the Fed may continue to raise the federal funds rate from its current 2 percent to at least 3.5 percent by 2020, which could push up short-and long-term interest rates and the dollar.
At the same time, inflation levels in other major economies are rising, while rising oil prices are exacerbating inflationary pressures. That means other major central banks will follow the Fed towards normalizing monetary policy, which will reduce global liquidity and put upward pressure on interest rates.
Third, trade disputes between Trump government and countries such as China, Europe, Mexico and Canada will almost certainly escalate, leading to slower economic growth and higher inflation.
Fourth, other U.S. policies will continue to increase stagflation pressure, prompting the Federal Reserve to continue to raise interest rates. Government is restricting inward / outward investment and technology transfer, which will undermine the supply chain.
Fifth, growth in the rest of the world is likely to slow-when they see it necessary to retaliate against US protectionism. China has no choice but to slow down its growth to cope with overcapacity and excessive leverage, or it will trigger a hard landing.
Sixth, Europe`s economic growth will slow as a result of tight monetary policy and trade frictions. In addition, the unresolved "bad luck cycle" between the government and banks holding public debt in countries such as Italy would magnify the problems of an inadequate risk-sharing, incomplete monetary union. In this case, the global recession could prompt Italy and others to leave the euro zone altogether.
Seventh, the U. S. and the global stock market bubble. The U.S.`s price-to-earnings ratio is 50 percent higher than its historical average, private equity valuations have become too high, and government bonds are too expensive given their low yields and negative maturity premiums. High-yield credit has become increasingly expensive as U.S. corporate leverage has reached all-time highs.
Moreover, many emerging markets and some advanced economies are clearly overleveraged. Commercial and residential property is too expensive in many parts of the world. The correction in emerging market stocks, commodities and fixed-income assets will continue as global dark clouds gather, and risky assets will be repriced.
Eighth, once corrected, the risk of illiquidity and underselling / undervaluation will become more serious. Broker-dealers have reduced market-making and warehousing activities. Excessive high-frequency / algorithmic trading will increase the likelihood of "lightning crashes". Fixed income instruments are also increasingly concentrated in open-trade open-ended index funds and dedicated credit funds.
In a risk-averse scenario, emerging markets and advanced economies, with huge dollar-denominated liabilities, will no longer be able to act as lenders of last resort. As inflation rises and policy normalizes, the support central banks provide in the years following the crisis is no longer reliable.
Ninth, when the latest growth rate was 4%, Trump was already attacking the Fed. Imagine how Trump will perform in the 2020 election year, when economic growth may fall below 1% and unemployment will occur.
Finally, once the above-mentioned impeccable storm appears, government will almost have nothing to do with it. Large-scale public debt has limited the scope for fiscal pumping. The likelihood of more unconventional monetary policy will be limited by balance-sheet inflation and insufficient room for interest-rate cuts.
The New crisis of "Real Hammer" by two Multi-experts
Worryingly, Dr Llewellyn is not the only one predicting a new crisis.
In February 2018, the US demographer and financial commentator, Harry Dent (Harry Dent), warned that the world`s economic was facing a deeper recession than the Great Depression (Great Depression)-and the result was, Global real estate prices could plummet by more than 50%. It is reported that Dent accurately predicted the 2008 collapse.
In April, billionaire Bill Gates (Bill Gates), founder of Microsoft`s (Microsoft), made headlines after declaring that another global financial crisis was "certain to happen".
For years, Australian economist John Adams (John Adams) has warned that the global economy is on the verge of collapse due to record public and private debt and ultra-low interest rates. Excessive public spending and huge real estate bubbles, etc.
Adams said the world is now "heavily indebted" and is experiencing "the biggest financial bubble in history".
"as national interest rates continue to rise, eventually individuals and institutions will default because they cannot repay interest and principal," he predicted.
"after a default, individuals and lenders who default will suffer losses, which will shake the government that supports them through direct financing channels and financial guarantee."
Once the government is heavily indebted, such as Italy, the fiscal situation becomes unstable, which will cause financial markets to panic and lead to a collapse of confidence. As bond prices fall, holders of government bonds themselves will crumble, which in turn will spread and cause government bondholders to suffer huge capital losses from government bonds.
The cycle will continue until a major government or systemically important financial institution defaults, he said.
Three Lucky countries: Australia
At a time of growing global tension and hot water, Australia, like a beauties on the wall, is far from all the distractions of the world.
Australia is not only one of the richest countries in the world, one of the world`s 12th largest economies, but also the only developed economy that has not experienced a recession for 27 years in a row. Even in the face of the 2008-2009 global financial crisis, this is still the case. Since 1992, Australia`s economy has grown at an average annual rate of more than 3%. The latest report shows that, driven by high house prices and huge pension balances, Australia has overtaken Switzerland as the world`s richest country with the highest median wealth. As much as $ two hundred thousand.
This may be a joke for Australians struggling with high oil prices, high energy prices and high living costs, according to the Credit Suisse (Credit Suisse) `s annual Global Wealth report, but on average Australia is really the second richest country in the world.
The average adult wealth in Australia was US $ four hundred and eleven thousand and sixty (A $ five hundred and seventy nine thousand two hundred and nineteen), the second highest in the world after Switzerland, the report said.
Michael Marr, head of private banking at Credit Suisse Australia, said: "as a result of Australia`s pension system, there has been an unprecedented 26 years of sustained economic growth, high property prices, a strong Australian dollar and a wealth of natural resources. Australia is still one of the richest countries in the world. "
And Australia will become richer.
Australia`s millionaire population will grow 41 percent to 1.8 million over the next five years, the third-largest increase in the Asia-Pacific region after Greater China and New Zealand, according to the report. The proportion of women in the country`s billionaires is also prominent, at 18.6%. In addition, Australia ranked 10th in the world in terms of the number of ultra-high net worth households, or households with net worth of more than $50 million.
According to the report, Australia`s wealth distribution is the most equitable compared with other developed countries. Only 6 percent of Australians have a net worth of less than $10,000, compared with 18 percent in the UK and 28 percent in the United States. Australia topped Switzerland by $ one hundred and ninety one thousand four hundred and forty nine in median adult wealth, with Switzerland`s median adult wealth at $ one hundred and eighty three thousand three hundred and thirty nine.
Andrew McAuley, chief investment officer at Credit Suisse Australia, says many Australians may not be as rich as they actually are, mainly because there is little focus on pension balances.
"what we`re seeing is very little real wage growth and rising costs of living and necessities," McAuley said. "I don`t think Australians pay enough attention to pensions. They noted that house prices were rising and falling, but they did not take into account that their pension growth was fairly good, as described in the report. Australia`s total pension is A $2.7 trillion and is expected to double over the next 10 years. "
Australia has a robust management structure, a stable policy system and a transparent regulatory system that minimizes sovereignty risk while creating strong economic resilience. In this uncertain world, stand firm.
This year, Australia will become the world`s 13th largest economy and Asia`s fifth largest economy. Australia`s nominal GDP is estimated at US $1.5 trillion (A $ one trillion eight hundred and ninety nine billion nine hundred and ninety nine million nine hundred and ninety nine thousand nine hundred and ninety nine), or 1.8 percent of global GDP. Australia`s GDP almost tripled from 20 years ago.
Meanwhile, thanks to a robust policy framework and a diversified service economy, 15 of the 20 sectors in Australia are more productive than their global counterparts. Services (including construction) accounted for 3/4 of (GVA) in real terms. The complex financial and insurance services sector is the biggest contributor, accounting for 9.4%.
Moreover, Australia`s relatively independent economic chain has left industries in their own shape, with little impact on other sectors even as the boom in one sector, such as mining, fades.
Stable institutions, smart talent, rich natural resources, mature service sectors and resilience to global economic change, in all respects, also make Australia the country that attracts the largest number of immigrants with high net worth investments.
In 2017, a total of 10, 000 successful individuals with a net worth of US $1 million (A $1.25 million) or more emigrated to Australia, according to the Global Wealth Migration Review (2018 Global Wealth Migration Review). Especially by China`s high net worth people`s favor.
The 2017 China Private Wealth report, published jointly by Bain`s (Bain and Company) and China Merchants Bank (China Merchants Bank), points out that China`s high net worth groups are gaining interest in investment in Australia and Canada. Of the 3000 people surveyed, about 24 percent chose to invest privately in Australia, the third most popular destination for the super-rich.
The global financial crisis has both change and nothing change.
Unlike 2008, when the government had the policy tools needed to prevent economic freedom from falling, policymakers who had to face the next recession would be at a loss when overall debt levels were higher than in the last crisis. When the crisis arrives, the next recession is likely to be more severe and lasting than the last one.
Understanding, the extent and importance of mapping and measuring the complex relationship between people`s security, well-being and dignity and finance is a task that no organization can ignore, no matter how daunting the challenge. But at present, there is still a huge gap and gap; and the task is neither easy nor fast.
"over the past few years, the situation has been very general. Our unemployment rate is high, wage growth is stagnating, and housing prices are simply too high to bear-these are not the problems of a recession. "
Australia`s economy is now "muddled" and consumption is still inadequate due to slow housing growth. And after 27 years of continued economic prosperity, Australia may become complacent.
How can Australia respond more appropriately to, and again avoid, the effects of the next financial crisis? Listen to lessons, prepare prevention strategies for different situations in advance, and think about how to reform to maintain "good luck".
