Are we facing a new financial crisis? 7



 

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.

 

Europe

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.

 

China

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.

 

US

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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Are we facing a new financial crisis?, 5.0 out of 5 based on 4 ratings
  • To stay ahead in forex trading, i really feel that we should be aware of global events!

  • I do not think we a facing a new financial crisis, just a continuation of the one that started in 2008 with the American sub-prime and the credit crunch. In my opinion this whole crisis comes in three parts. The first part was the American sub-prime which lead to the collapse of Lehman Brothers, Bears Stern, and Merrill Lynch. We are currently in the middle of the second part which is in Europe and involves the sovereign debt crisis. I fee that the crisis is being exaggerated and that is no bad thing. The outcome will be a level of budgetary control by the Club Med members. This is a problem with the Eurozone and the outcome will be that it is fixed. The third act will be around China where there will be a melt down of their economy. The cause will be similar to the Eurozone in so far as too few budgetary controls. However China has an addded problem since because of the lack of transparency, no one will be able to assess the extent of the problem. At least in Eurozone, the size of the problem can be assessed and the size of the problem is the size of the solution. In China no one will be able to assess the size of the problem and thus no one can estimate the size of the solution. This will precipitate a complete breakdown of any confidence and create the meltdown. Like the Eurozone, China will emerge having put in place a fix with the world economy becoming stronger and more able to prevent a repeat though should it reoccur (which it almost certainly will) better prepared to deal with it.

    In summary things will improve and get better though in reality nothing much will have changed. History has an awful habit of repeating itself with the current crisis not being the first of its kind.

    • I like your views on China.. indeed not much is known over there in the far east.

  • Jackie W. Cox

    I really enjoyed reading the article and the comments that have been posted. I learn every time I do. Thanks so much for the time and effort for the article and the comments alike. Thank you both for the learning of how the economies work and it helps to keep up on whats going on in this small world also. I hope and pray we have a good trading week to come. God Bless and Good Luck.

  • Tomislav

    Very nice!
    I think that US will face a huge inflation, that might spread on EU.
    China on the other hand is developing it’s markets, but concern is boom in real estate business. I read somwhere that in Shangai 40% of business offices are empty, because too much of them were built in the last 10 years.

    • Wow. thanks for the info on the empty offices.. that may be a problem in time to come …