God knows what will happen but there are a lot of small and not so small fires everywhere:
- Trade war
- Chinese growth faltering
- Chinese debt bubble
- Brazilian crisis
- Turkish crisis
- Italian populism / Italian debt
- US student loan bubble
- Real estate market slowing down in the US and the UK
- Brexit
- Over leveraged private companies because of the intense private equity deal making
- Tech companies reaching market saturation (internet access, smartphone or pc ownership, social medias, ecommerce), tech industry ceasing to be a high growth industry
I may forget some. Perhaps the next financial crisis will be the result of a combination of all of these rather than a single event (like the 2008 financial crisis was the result of a combination of a real estate market slowdown, a subprime debt bubble, and an over leveraged and complacent banking system, followed in 2011 by a sovereign debt crisis, of which Italy was already the most worrying elephant in the room).
Between the stock market going much higher than the actual growth, the post-2008 inequality issues, the student debt disaster, the high risk from oil companies being valued trillions of dollars and everyone being in passive investing, I’m fascinated to see what the next crisis will be.
Short answer: yes, we will see another financial crisis. Probably in fall 2020. In terms of economic cycle, covid was just bad luck and did not lead to corrections - on the contrary.
To make myself eligible for some precog society I say we will see a major downturn worldwide in Oct 2020.
Well, hopefully. A lot of cats are getting put back already here. And what will happen when the big next financial crisis hits? It is a sellers market now, but that will turn around; wondering what companies are going to do then.
Its not going to happen, the government will bail out the banks again and this time they won even bother to punish them of police them because "it was a pandemic", so congress and who ever gets the presidency will agree because it is personally profitable and they aren't the ones standing in line at the foodbanks. Everything will pick up again right where financial system left off and in another 8 to 12 years we will have another crash maybe that time we will get some reform but we wont have a middle class anymore by then.
Yesterday, there was a news coverage on the 2 year aftermath from Lehman Brothers collapse. The New York Time reporter Andrew Ross Sorkin predicted in the interview the next wave of collapse will be governments, like Greece and possibly states like California.
I was a little bit surprised to hear such a strong opinion. It is clear the federal reserves do have now better tools to avoid private institution collapse which could have severe impact on the economy. On a bigger scale, like states it seems not all that clear what regulation mechanism are available. But reading repeatedly the warning signs from several known analysts about the debt issue and upcoming correction I am wondering if such collapse scenarios will take place.
This is the start of the next Global Financial Crisis folks. It's not hard to see the pieces in motion now:
1 - The Q1 supply shock is going to be a temporary thing. They'll recover alright after causing some companies to miss their Q1 earnings. If this was the only effect, we would recover just fine here later this year, but...
2 - Coronavirus is just getting started in the US and Europe. If it spreads widely, and unabated, then the those countries will be forced to enact school closures, business closures, etc, which will cause a massive demand shock.
3 - Demand shock will tank airlines, cruises, restaurants, malls, etc. Basically anything that requires groups of people to make money.
4 - Eventually, demand shock will hit corporate balance sheets in a big way. Many corporations (especially in the energy industry) are overloaded with debt [1]. If this goes on long enough, then those companies will go bankrupt.
5 - If enough companies default on their debt simultaneously, then derivatives on corporate debt (defaults) will cause a systemic crisis again [2].
There's no guarantee that this will happen, but if it does it's going to make 2008 look like a joke by comparison.
If it does, we need to do the right thing this time: wind down the banks and let them fail.
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