Are we facing a new financial crisis?
This question is probably on everyone’s mind and yet no one knows the answer. In fact a look at our Have Your Say poll gave a 50 / 50.
While no one knows for sure what may hit us in the near future, knowing the potential flash points and monitoring them will help us go a long way.
The Euro Zone budget deficit crisis is at a very crucial point. Greece is having a second national election on June 17. Should an anti austerity government come into power, bailout arrangements may dissolve and an Euro Zone exit by Greece may happen. That will cause an unprecedented event of financial ripples.
Besides Greece, the deficit contagion has spread to other countries such as Ireland, Portugal and of most concern, Spain. Lately due to the fallout from the Greek election, Spain is coming under increasing scrutiny from the markets. It is among the biggest economies of the European Union and being under financial stress definitely does not go well with the markets. Recent interest rates demanded for holding Spanish debts have almost hit critical levels typical of bailouts. If a bailout does indeed happen for Spain, sentiments will probably be hit hard.
We know that China is primarily an exports based economy. While it is trying to develop it’s domestic market, time is still needed. Due to the recent financial woes spreading from the Euro Zone, China is facing a slow down and being the de facto economy to drive the global economic growth machine, sentiments feedback to a negative spiral. Watch out for further signs of slowing down if any. This suggests that the global economy is indeed bleeding out.
Uncle Sam has enjoyed relatively good progress since the 2008 financial crisis. Many attribute this to the willingness of the US government and Federal Reserve to deploy stimulus programs such as the quantitative easing. The unemployment rate seemed to have spiked and is now retreating. However recently signs of a slow down are developing and we all know that the US debt levels are at their highest. Considered too big to fail, any adverse development will probably bring the financial system down to it’s knees.
So there you have it. No one can answer you if a financial crisis is upon us. Being a prudent investor / trader, monitoring the potential areas of fall out is a wise stance to take.
Thank you readers for your time and why not head out to vote for the new Have Your Say ! poll?
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