Are we about to face a new economic crisis?

Are we about to face a new economic crisis?

Are we about to face a new economic crisis?

According to one of the world's largest financiers we are about to face a repeat of 2008. George Soros stated this recently in one of his interviews. According to George Osbornethe, Minister of Finance of the United Kingdom, this year will be very harsh for the global economy.

What factors indicate the possibility of a new round of crisis? First of all, it is the situation on the stock market. At the beginning of this year the Chinese market has already stopped twice in order to avoid a serious collapse. Moreover, after China, the stock markets of Europe and the United States tend to tumble.

However, officials and organizations are trying to reassure the worldwide community. They say that there is no crisis in sight. The World Bank predicts the growth of the global economy of 2.9 per cent this year. Leading analysts also do not see any problems.

However, commodity prices continue to decline as well as the bond yields. And it may indicate that investors are not completely satisfied with current growth rates. The decline of the indices is a sign of the weakness of the world’s largest economies. In particular, in USA the last Manufacturing Purchasing Managers' Index dropped below 50 points indicating a slowdown. At the same time the rate of world trade declines.

On the other hand, the service sector experiences a clear rise and the positive trend on the labor market of the USA continues.

Is it fair in this situation to speak about a crisis similar to the one that erupted in 2008? On the one hand, the main problem at the time was the debt situation. But today in China we see the growth of the debt bubble. Moreover, the increase in lending shows that loans are granted without proper insurance.

However, we must admit that China is a regulated economy. The state has enough funds to prevent the debt crisis. In addition, local banks in China do not have such close ties with Western banks. Therefore, the collapse of these banks will not be too noticeable for the global financial system.

The danger of this situation lies in the fact that in case of escalation, the Chinese government may devalue its currency again, despite the fact that the local currency today continues to fall in price. Asian countries and then the whole world will have to think about the devaluation of their currencies to save their position on the markets in such a situation. It can cause significant problems for Asian companies that have loans denominated in the US currency.

Another interesting fact is that the quotes of a barrel of oil per ounce of gold rose to record levels. Historically, when this index reached its maximum values, a crisis occurred. We are witnessing the same situation today.


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