The next financial crisis

Submitted by Matthew on 4 October, 2017 - 10:09 Author: Colin Foster

According to the Financial Times (1 October), credit-card and similar debt in the UK has been soaring since late 2013, and “regulators fear banks have underestimated the potential losses they face from borrowers unable to make repayments on their loans and credit cards in a downturn.

“The Bank of England says that in a hypothetical stressed economic scenario the UK banking system would suffer consumer loan losses of about £30 billion over the next few years, representing a fifth of consumer credit.”

In late September Deutsche Bank researchers produced a report on ‘The Next Financial Crisis’

Looking back to 1600, they show that since 1971 financial crises have become more and more frequent, on a scale exceeded only by the 1920s and 30s. There is more and more debt in the system, moving round faster and faster, and with more potential tripwires in its circuits.

Any one of many stumbles could trigger a crash. The re-raising of central bank interest rates from their ultra-low levels since 2008 could do it.

So could a lurge into deflation in consumer prices, only narrowly avoided since 2008; or a correction of the zooming-ahead since 2009-10 of share and bond prices compared to consumer prices.