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Tags: Wolf | financial | crisis | inevitable

FT's Wolf: Future Financial Crisis 'Inevitable'

By    |   Thursday, 18 September 2014 10:08 PM

The global financial system hasn't improved enough since the 2008 financial crisis to prevent another one, says Martin Wolf, chief economics commentator of the Financial Times.

"We really didn't change our situation profoundly," he told Yahoo. "We still rely strongly for growth on demand generated by further accumulation of debt. So the debt machine will have to be restarted."

And that machine is a flawed instrument, Wolf said. "It depends on the creation of money and credit by financial institutions that are highly leveraged, highly integrated with one another and very complex," he said.

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"Though we have improved some of this, in other ways it's worse. We have fewer of these institutions. They are even more too big to fail in some respects than before, and it remains a highly global integrated system."

All this means trouble is coming, Wolf said. "If you have an unstable system being driven in this way, crises are inevitable."

Private equity star J. Christopher Flowers, CEO of J.C. Flowers, also sees crisis on the horizon, thanks to over-regulation of the banking industry.

"All the stuff that has happened, and all the rules we’ve introduced have depressed profitability. And that is a real vulnerability," he told the Financial Times. "Nobody is going to invest in an industry with returns of 5 percent."

The idea that a money lender could be as low-risk as a utility is laughable, Flowers said. "That you could design this so that there would never be another banking crisis again is a utopian idea. I guarantee that we will have another banking crisis."

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Finance
The global financial system hasn't improved enough since the 2008 financial crisis to prevent another one, says Martin Wolf, chief economics commentator of the Financial Times.
Wolf, financial, crisis, inevitable
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2014-08-18
Thursday, 18 September 2014 10:08 PM
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