Tags: BIS | chief | financial | crisis

Evans-Pritchard: BIS Chief Wary of Another Financial Crisis

By    |   Monday, 14 July 2014 07:09 PM

Conditions are just as ripe for a global financial crisis as they were in 2007, only now debt burdens are greater and emerging markets are less stable, Jaime Caruana, head of the Bank for International Settlements told Guardian columnist Ambrose Evans-Pritchard.

As investors desperately scour the world for yield in a low-interest-rate environment, they are ignoring the fact that monetary policy will eventually tighten, Caruana says.

"Markets seem to be considering only a very narrow spectrum of potential outcomes," he maintains. "They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

In developed economies, debt-to-GDP ratios have risen 20 percentage points since 2007, to 275 percent, according to Caruana.

"It may be the case that the debt is better distributed, because some highly-indebted countries have deleveraged, like the private sector in the U.S. or Spain, and banks are better capitalized," he said. "But there is also now more sensitivity to interest-rate movements."

Arturo Bris, professor of finance at IMD business school in Switzerland, says another financial crisis may occur as soon as next April.

In a commentary provided to Moneynews, he listed eight possible causes of a meltdown.

1. Stock market bubble.
2. China Banking Crisis.
3. Energy crisis.
4. Real estate bubble.
5. Corporate ratings and bankruptcy crisis.
6. War and political conflict.
7. Poverty.
8. Cash and hyperinflation. The huge cash holdings of companies and central banks could hurt the economy, Bris writes.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Conditions are just as ripe for a global financial crisis as they were in 2007, only now debt burdens are greater and emerging markets are less stable, Jaime Caruana, head of the Bank for International Settlements told Guardian columnist Ambrose Evans-Pritchard.
BIS, chief, financial, crisis
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2014-09-14
Monday, 14 July 2014 07:09 PM
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