It is apparent that the underlying problems that brought the global financial system to the brink of collapse ten years ago have not been resolved. In fact, they have been amplified by the unprecedented injection of liquidity into the financial system via the lowering of interest rates, quantitative easing and other monetary policy tools employed by the world’s major central banks in the wake of the 2008 Crash. Instead of increasing aggregate demand and investments, quantitative easing has mainly propped up asset prices, while increasing overall global debt by over 40% in less than 8 years. Meanwhile, key indicators of the health of the real economy such as the velocity of money, the Baltic dry index or productivity growth are collapsing and wealth inequality has soared drastically.
The cumulative effects of the raising of interest rates in the United States, overvalued and overleveraged financial markets, unsustainable levels of personal, private and public debt levels in the West and elsewhere and, the most recent addition, an impending trade war between the US and China, are now starting to take their toll. Impending crises in emerging markets, in equity and junk bond markets, the return of the banking and sovereign debt crises in Europe, and the threat of major currency market turmoil all signal that another major Crash might just be around the corner.
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