While the biggest developed economies may be rebounding, multiple dangers remain, meaning central banks must maintain their monetary to stimulus, according to an editorial in The Economist.
"Gazing across the battered economies of the rich world it is time to declare that the fight against financial chaos and deflation is won," the editors write
. In the United States, the economy grew 2.4 percent last year, and many analysts expect similar growth this year.
"However, the global economy still faces all manner of hazards, from the Greek debt saga to China’s shaky markets," the editorial notes. "Few economies have ever gone as long as a decade without tipping into recession." The U.S.' Great Recession ended in 2009.
"Sooner or later, policymakers will face another downturn," the editorial explains.
"The danger is that, having used up their arsenal, governments and central banks will not have the ammunition to fight the next recession. Paradoxically, reducing that risk requires a willingness to keep policy looser for longer today."
Meanwhile, Jamie Dimon, CEO of JPMorgan Chase, warns that we haven't seen the end of financial crises.
"The trigger to the next crisis will not be the same as the trigger to the last one, but there will be another crisis," he wrote in his annual letter
"Triggering events could be geopolitical, a recession where the Fed rapidly increases interest rates, a commodities price collapse, a commercial real estate crisis, bubbles, etc."
And what about the impact on financial markets? "The markets in general could be more volatile" than in the typical financial crisis, Dimon noted.
The S&P 500 index suffered a negative total return of 37 percent in 2008.
Problems such as banks' low inventory of securities and reluctance to extend credit, thanks largely to increased regulation, "make it more likely that a crisis will cause more volatile market movements with a rapid decline in valuations even in what are very liquid markets," Dimon explained.
"It will be harder for banks either as lenders or market-makers to 'stand against the tide.'"
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