With interest rates at a 5,000-year low, are we really surprised that a crash is coming?
The International Monetary Fund (imf) is warning that a financial crisis is practically guaranteed, and it’s just a matter of time before it strikes. The organization’s newly released Global Financial Stability report is sobering reading. The flaws in the global financial system have not been fixed, it says.
It highlights soaring global debt, particularly in emerging markets. The implication is that we could see a repeat of the 1997 currency crisis also known as the “Asian Flu,” which saw massive currency devaluations, contractions in global trade, economic turmoil, and social instability.
But conditions are much more dangerous today than back then. Virtually the whole world is teetering on recession, the West and Russia are back in Cold War mode, the Middle East is engaged in actual war in Syria, and the world is more interconnected than ever—potentially making the transmission of financial diseases much quicker.
Startlingly, the imf says the looming economic crisis is a direct result of how authorities tried to solve the last one. The decision to slash interest rates to such unprecedentedly low levels has encouraged the massive debt buildup—a problem for which there is no painless solution.
Global interest rates are at 5,000-year lows, says Agora Financial’s Bill Bonner. Since the building of the Egyptian pyramids—that is to say, forever—interest rates have never been this low, he reports.
“But woe to the price-fixer who fixes the price of money too low … for too long … and then attempts to raise it,” writes Bonner.
“That is the jam in which [Federal Reserve Chief] Janet Yellen finds herself. She is damned if she does—for she will wipe out trillions of dollars from the value of stocks and bonds. She is also damned if she doesn’t—for she will only make the situation worse by driving more money into more unsustainable asset price booms.”
The imf report comes as former Federal Reserve chief Ben Bernanke is on tour promoting his new book about the 2008 economic crash. And how he saved the global financial system.
The Great Recession panic in 2008 was worse than even the crash of 1929 that set off the Great Depression, Bernanke told cbs.
But according to the imf, the very actions Ben Bernanke is patting himself on the back for virtually guarantee another financial crisis.
It is only a matter of time. And the longer it takes before it strikes, as Bonner notes, the worse it will be.
(Listen to Joel Hilliker interview Robert Morley about the implications of the latest imf report. Begins at 31:53.)
Economic crisis is coming. Five thousand years of human history offers ample evidence.
“[E]ven with the U.S. economy and the world economy in such a precarious state, hardly anyone seems concerned!” wrote Gerald Flurry earlier this year. “Americans know far more about the Super Bowl than about this super crisis threatening to destroy our financial system.”
Full article: IMF Warns Next Financial Crash Is Only a Matter of Time (The Trumpet)