Some economists say that it is enough for China to open up US Treasury bonds on the open market. Then a sharp drop in the US dollar to other currencies would trigger a new global financial crisis. But does the como depend on this to trigger such a global crisis? For now, no, but will not there be a future big investment bank that wants to earn in this or a similar surgery, we do not know.
Please, answer, comments. I invite you to the discussion.
Dear Friends and Colleagues of RG
The issues of risk management in the context of determinants of the global financial crisis, globalization processes, technological progress and other factors I described in the publications:
Article APPLICATION OF DATA BASE SYSTEMS BIG DATA AND BUSINESS INTEL...
Article GLOBALIZATIONAL AND NORMATIVE DETERMINANTS OF THE IMPROVEMEN...
Article Determinants of credit risk management in the context of the...
Article Importance and implementation of improvement process of prud...
Article The role and application of Keynesian macroeconomic anti-cri...
Article THE SHADOW BANKING AS AN EXAMPLE OF INEFFICIENCIES IN THE FU...
Article ACTIVATING INTERVENTIONIST MONETARY POLICY OF THE EUROPEAN C...
Article A safe monetary central banking policy as a significant inst...
Article Anti-crisis state intervention and created in media images o...
Article Soft monetary central banking policy and Plan for Responsibl...
I invite you to discussion and cooperation.
Best wishes
Habit of human not to spend from saving as of behaviour economics at individual and national level
The issue of the impact of monetary policy on the stability of financial systems in the context of the global financial crisis is described in the publication:
https://www.researchgate.net/publication/320060288_ACTIVATING_INTERVENTIONIST_MONETARY_POLICY_OF_THE_EUROPEAN_CENTRAL_BANK_IN_THE_CONTEXT_OF_THE_SECURITY_OF_THE_EUROPEAN_FINANCIAL_SYSTEM
I invite you to discussion and cooperation. Greetings
Crises are inherit in the global system if left unchecked. That is why there is room for intervention thru policies. In normal times, the global financial system does a good job of allocating funds. However, when signs of distress are ignored and economic agents continue to follow short term interests all sorts of red flags are raised but it takes longer to act to fix things due to what is sometimes referred to as the "herd behavior"
Our current financial system generates crisis every certain time. This part of the system where money is the counterpart of debt and both grow exponentially. See e.g.: Chapter Local Money as Solution to Capitalist Global Financial Crises
or:
Chapter Smarter Money for Smarter Cities: How Regional Currencies Ca...
or very short:
https://www.google.cl/search?q=Fuders+alternative+concepts+for&oq=Fuders+alter&aqs=chrome.1.69i57j69i59l2.4130j0j4&sourceid=chrome&ie=UTF-8
Best regards,
The key factor that could lead to another financial crisis is the same that led to the Financial Crisis of 2008. This factor is Model Risk. Model risk is the use of a model while ignoring or not paying attention to the key assumptions underlying the model. Model risk was what took down Long Term Capital Management, Lehman Brothers and many others. Model risk was also what caused the Financial Crisis of 2008 because Banks ignored the key assumptions underlying the models they used in managing their real estate portfolios.
Dear Dariusz
Similar events that caused previous financial crisis. Examples of these events are: 1. Big banks failing. 2. Asset bubble bursts such as the real estate market.
3. Financial market crash such as the stock market. 4. Restrictive trade policies (tariffs, quotas, and outright trade blockages). 5. Economic recession/depression causing bankruptcies and unemployment. 6. Currency sharp depreciation/devaluation.
I think the question is very relevant in the present time. However, it is extremely difficult for someone to exactly predict what could lead to another financial crisis. I think three factors that could trigger a financial crisis are trade wars, over in-indebtedness of many countries and internal political and financial instability in the EU and the surrounding areas. I thought a lot about this question and discussed this in my book, "The Global Financial Crisis: From US subprime Mortgages to European Sovereign Debt", published by Routledge 2016. Book The Global Financial Crisis: From US Subprime Mortgage Crisi...
More recently the last couple of years major differences surfaced within the EU due to the rise of nationalistic anti-EU/anti-immigration extreme populist parties in countries such as Italy, Poland, Hungary and almost every EU country. Such discord is challenging the unity of the European Union. Furthermore the fiscal treaties of the EMU are for the first time being seriously challenged (Italy). This suggests the survival of the Euro is in doubt. I discussed this in detail in my most recent article this year (in August), "Why EuroZone Collapse should not be a Surprise: The Role of Germany and Greece".
Article WHY A EUROZONE COLLAPSE SHOULD NOT BE A SURPRISE: THE ROLE O...
history tells us that financial crises strike rich countries every 28 years on average, often much shorter.
The roots for next crisis Will be fast-growing pockets of debt, as in 2008. and a lot of debt now lurks in shadow banking, out of the supervisors screen .
...and the debt comes about because interest makes deposits grow. Since there is no interest without debt, debt grows in a likewise manner.
See e.g.: Chapter Local Money as Solution to Capitalist Global Financial Crises
or:
Chapter Smarter Money for Smarter Cities: How Regional Currencies Ca...
or very short:
https://www.google.cl/search?q=Fuders+alternative+concepts+for&oq=Fuders+alter&aqs=chrome.1.69i57j69i59l2.4130j0j4&sourceid=chrome&ie=UTF-8
Best regards,
Growing debt will be the source for next financial crisis. Three parties may trigger financial crisis viz. USA, China and EU. USA and China trade war and instability and debt burden of EU.
I cannot provide you with a very scientific answer to your questions, yet when I talk to people in the financial world, regularly the topic "corporate debt" is mentioned. Should the US economy run out of steam and should corporate debt be downgraded across the industry, then many business would default. That may trigger the next financial crisis. See also the following FT-article which points towards a similar direction:
https://www.ft.com/content/0bf2d9b8-a0ee-11e8-85da-eeb7a9ce36e4
The issues of risk management in the context of determinants of the global financial crisis are described in the publications:
https://www.researchgate.net/publication/323244391_Determinants_of_credit_risk_management_in_the_context_of_the_development_of_the_derivatives_market_and_the_cyclical_conjuncture_economic_processes
https://www.researchgate.net/publication/327201116_Importance_and_implementation_of_improvement_process_of_prudential_instruments_in_commercial_banks_on_the_background_of_anti-crisis_socio-economic_policy_in_Poland
https://www.researchgate.net/publication/327201132_The_role_and_application_of_Keynesian_macroeconomic_anti-crisis_theories_in_the_context_of_development_of_the_financial_system_in_Poland
https://www.researchgate.net/publication/320074785_THE_SHADOW_BANKING_AS_AN_EXAMPLE_OF_INEFFICIENCIES_IN_THE_FUNCTIONING_OF_THE_BANKING_SYSTEM_IN_POLAND
I invite you to discussion and cooperation. Greetings
I don't have a definite answer to the question. On the one hand, a system of global financial security has been created, including Basel III, Solvency II. Time will show how effective it is. On the other hand, any system develops in one way or another under certain conditions. These conditions, in turn, are at the mercy of some triggers and factors. It seems to me that one of these factors could be the modern financial technologies, including cryptocurrencies. In this context I would like to see the opinion and communicate with professionals in the field of finance.
Is it possible to combine the issue of reliability of compliance with banking procedures with operational risk and the possibility of losing liquidity by the bank?
The basic data used to determine the effectiveness of commercial banks are included in the banks' financial statements. these data relate to the bank's involvement in specific active transactions, necessary to determine the quality of the loan portfolio, to determine the quality of credit, operational, liquidity, debt, operational risk management processes, etc. An IT risk analysis should be added to this. In addition, financial statements also include data to calculate the deposit security ratio, profitability of individual categories of assets and use of available financial resources. This type of data should be combined with individual categories of estimated risk levels measured in correlation to the involvement in individual active operations. However, in the case of the analysis of the investment bank's effectiveness, it should additionally include an analysis based on risk assessment models for investment in derivatives and other capital market instruments. In this regard, many banking procedures were previously unreliably carried out which generated very high levels of credit risks and caused huge financial losses, eg in the Lehman Brothers investment bank, bankruptcy of this bank and the beginning of the global financial crisis in mid-September 2008.
I researched this problem and in my publications I confirmed that it is possible to combine the question of the reliability of banking procedures implemented in the area of risk management with sources of financial crises.
However, I would like to hear your opinion on this matter.
In view of the above, I am asking you the following question: Is it possible to combine the ethics of banking procedures in the field of banking operations with the sources of financial crises?
Please, answer, comments. I invite you to the discussion.
Can current globalization processes increase the systemic risk of global economic and financial crises?
Yes. In my opinion, globalization is leading to the Integration of Business Cycles. In this way, globalization may deepen economic crises, including the global financial and debt crisis. An example was the global financial crisis, which appeared in mid-September 2008. At that time bankruptcy was announced by one of the largest investment banks in the world. As a result of unreliable credit risk management procedures, billions of USD of financial losses have been generated. It turned out that the unwritten rule no longer works, that "big can not fall". However, it is the emergence of ever larger international corporations and financial institutions that is one of the main determinants of the processes of economic globalization that have been progressing in recent years. these processes continue. Every few years, as a result of the merger of some of the largest financial institutions through mergers and acquisitions, more and more banks are formed. On the other hand, international operating industrial corporations move their factories from country to country, looking for cheaper workforce, and international trading and service corporations set up subsidiaries and sales outlets in other countries. Capital links grow transnational and thus systemic risk grows, whose sources can be related to the progressing economic globalization.
Please reply. I invite you to the discussion
What is the important topic for the study of the sources of the global financial crisis in 2008?
An important topic in the area of finance is the management of financial risk in the context of the analysis of sources of economic, financial, debt and other crises. The financial systems still have not been improved in their functioning, especially in the area of investment banking, in terms of unethical practices, the use of which was one of the significant sources of the global financial crisis of 2008.
In connection with the above in my opinion important topic on finance is the issue of risk management in the context of the analysis of the sources of the global financial crisis.
I invite you to the discussion
In the context of the above considerations, the following question is also current:
Do large corporations and financial institutions contribute to the generation of globalization processes?
Do multinational corporations and financial institutions, including banks and investment funds, play a significant role in generating globalization processes?
In recent years, the importance of supranational large corporations and financial institutions, including banks and investment funds, has been growing.
These large industrial, service, commercial and financial corporations are a particularly important factor in contemporary globalization processes. If such large corporations operate cross-border, cross-border in many countries, including small economies, generate negative processes of globalization, then in these countries reverse and deglobalization processes may appear.
Deglobalization, ie the reverse process to globalization, is taking place most strongly in those economic regions in which globalization processes generate many negative aspects.
In view of the above, I would like to ask you: Do multinational corporations and financial institutions, including banks and investment funds, play a significant role in generating globalization processes?
Please, answer, comments. I invite you to the discussion.
Are there verified and scientifically justified forecasts of the potential emergence of another global financial crisis?
In recent years, the importance of the problems of scientific attempts to verify and justify for formulated forecasts of the potential emergence of another global financial crisis is growing. The problem is particularly important because some of these theories suggest that the next global financial crisis may be similarly surprising for the majority of economic entities, but it may also be characterized by a sub-standard or higher level of negative economic effects of the downturn in the situation of the next global financial crisis.
There is no objective justification, which could be universally recognized as a highly probable forecast developed on the basis of eg an efficient combination of several theories developed on the basis of conducted scientific research. If that happened, then the principle of "self-checking prophecy" would work and expected on the basis of a widely recognized forecast at a given time the global financial crisis would not appear in the form or time when it was expected. The forecast event would not have appeared because the majority of interested persons, entities, including banks and investment funds, prepared for this expected event. As most stakeholders would trigger appropriate additional preventive and / or prudential instruments, the global financial crisis would not appear in line with the original forecast.
I invite you to the discussion.
On the other hand, different subjective opinions are formulated, attempts to forecast the development of domestic and international financial markets in the coming years and the potential emergence of another global financial crisis. Since the appearance of the previous global financial crisis in mid-September 2008, economists have formulated various theories about the determinants, scale and time of the emergence of another similar financial crisis in the future. I invite you to the discussion.
For example, there were theories that after 7 years of "lean" prosperity and economic growth will take 7 years of "fat" after which another crisis may occur. Functional theories suggest that another global financial crisis will appear soon, although it is not known exactly when. These theories are based on the thesis of not correcting the functioning of the overly liberalized, deregulated financial markets, i.e. the failure to remove the main sources diagnosed as the cause of the global financial crisis of 2008. Nor have the prudential procedures for credit risk management in investment banking been fully improved.
I invite you to the discussion.
Through the Federal Reserve Bank's anti-crisis policy of buying junk assets from commercial banks, millions of reprinted dollars were pumped into the economy without economic coverage in the equivalent of produced economic goods. A significant part of these additional dollars indirectly conjunctural generated a quick return of prosperity on the securities markets, perhaps too fast because in a few years after the global financial crisis in 2008, the valuation of securities on the largest securities markets exceeded the level of autumn 2008 .
I invite you to the discussion.
However, in the domestic economies there has been a clear improvement in the economic situation in, among others, production, income, investment, purchase of real estate, drop in unemployment, etc. The optimal quality of commercial banks' loan portfolios and the growing level of savings of people with a low share of financial surpluses in securities seem to suggest that the systemic credit risk in the economy has not yet reached its maximum levels. This subject is the subject of research, which I conduct in the area of the necessity of continuing the process of credit risk management improvement, examined, measured and accepted by commercial banks. I have published several scientific articles on this topic.
In view of the above, the current question is: Are there verified and scientifically justified forecasts of the potential emergence of another global financial crisis?
Please, answer, comments. I invite you to the discussion.
Should the Federal Reserve Bank in the US be the main institution shaping and leading pro-growth active state interventionism?
In principle, YES, but it should be specified precisely the framework for a possible anti-crisis launch and implementation of the policy of active state intervention. The Federal Reserve Bank should continue to fulfill its current functions. In this respect, it is the most important institution in the US in terms of maintaining financial stability in the banking system and indirectly in the entire financial system. In addition, indirectly supports inter-branch, transactional, market, business and cross-border trade and capital flows. As the Federal Reserve advises on the issue of maintaining financial stability, it also translates into the entire US economy and also to a large extent on the entire global economy while the economy The US is recognized as a key global player. On the other hand, the Federal Reserve Bank, using its monetary policy instruments and the possibility of buying back lost commercial loans and junk securities, should focus on stabilizing the situation on the financial markets rather than on actively stimulating demand for securities, which may generate another global one in the long run. financial crisis. I examined this problem and described it in my scientific publications.
In view of the above, the current question is: Should the Federal Reserve Bank in the US be the main institution shaping and leading pro-growth active state interventionism?
Please, answer, comments. I invite you to the discussion.
The emergence of new financial mechanisms drawing in on other currencies has already begun and some powerful countries like Russia and China are already trading based on their own currencies. As a very imminent possibility, US financial hegemony is going to be challenged by emerging rivals like China.
Instability of markets and the domination of the rich countries in the world.
The issues of globalization of financial and banking systems are described in the publications:
https://www.researchgate.net/publication/323244562_Adjustment_of_Polish_banks_to_international_standards_as_a_factor_of_globalization_of_the_national_financial_system
https://www.researchgate.net/publication/320061057_THE_IMPORTANCE_OF_ECONOMIC_GLOBALIZATION_IN_THE_CONTEXT_OF_THE_DEVELOPMENT_OF_THE_FINANCIAL_SYSTEM_IN_POLAND
https://www.researchgate.net/publication/327201145_Social_and_economic_determinants_of_the_processes_of_economic_globalization_that_shape_the_development_of_the_banking_system_in_Poland
https://www.researchgate.net/publication/320074691_ADMINISTRATIVE_LEGAL_AND_SUPERVISORY_DETERMINANTS_OF_GLOBALIZATION_OF_FINANCIAL_MARKETS_AND_THE_BANKING_SYSTEM_IN_POLAND
I invite you to discussion and cooperation. Greetings
The issues of risk management in the context of determinants of the global financial crisis are described in the publications:
https://www.researchgate.net/publication/323244391_Determinants_of_credit_risk_management_in_the_context_of_the_development_of_the_derivatives_market_and_the_cyclical_conjuncture_economic_processes
https://www.researchgate.net/publication/327201116_Importance_and_implementation_of_improvement_process_of_prudential_instruments_in_commercial_banks_on_the_background_of_anti-crisis_socio-economic_policy_in_Poland
https://www.researchgate.net/publication/327201132_The_role_and_application_of_Keynesian_macroeconomic_anti-crisis_theories_in_the_context_of_development_of_the_financial_system_in_Poland
https://www.researchgate.net/publication/320074785_THE_SHADOW_BANKING_AS_AN_EXAMPLE_OF_INEFFICIENCIES_IN_THE_FUNCTIONING_OF_THE_BANKING_SYSTEM_IN_POLAND
I invite you to discussion and cooperation. Greetings
The issue of the impact of monetary policy on the stability of financial systems in the context of the global financial crisis is described in the publication:
https://www.researchgate.net/publication/320060288_ACTIVATING_INTERVENTIONIST_MONETARY_POLICY_OF_THE_EUROPEAN_CENTRAL_BANK_IN_THE_CONTEXT_OF_THE_SECURITY_OF_THE_EUROPEAN_FINANCIAL_SYSTEM
I invite you to discussion and cooperation. Greetings
International politics would create some trouble in the international trade arena
Dear Colleagues and Friends,
In connection with the beginning of the New Year, the above discussion inspired me to the following considerations:
Apparently, on the financial markets and in macroeconomic determinants of the economic situation in particular sectors and entire economies of developed countries, there are symptoms that suggest a high probability of economic slowdown from 2020 in individual countries and, consequently, in the entire global economy. Therefore, I am asking you: Do you know the forecasts of the global economic development that would suggest a high probability of deceleration (or possibly acceleration) of economic growth from 2020 in individual countries and, consequently, in the entire global economy?
I wish you the best in New Year 2019. Best wishes
On the largest global stock exchanges in recent months, the amplitude of changes in valuation of share prices increased, there appeared greater nervousness not seen earlier for at least a few years. Could this be a signal to change the long-term trend? Trend changes from upward to downward? Is the level of valuations already clearly overvalued? What is the level of systemic credit risk in major economies? Are citizens again, like before the previous financial crisis of 2008, invest most of their savings in investment funds, including equity funds? However, is the situation in a cyclical and systematic situation still secure as most citizens invest most of their financial surpluses in safe bank deposits and most of the business entities develop their economic activity and new investments based on their own finances without loans? However, is the level of systemic credit risk already present in the largest global economies already high and, as a result, symptoms of the next global financial crisis appear? Does anyone of you conduct research in this topic?
Best wishes
The financial crisis was primarily caused by deregulation in the financial industry. That permitted banks to engage in hedge fund trading with derivatives. Banks then demanded more mortgages to support the profitable sale of these derivatives. ... That created the financial crisis that led to the Great Recession.
The stock market crash of 2008 occurred on September 29, 2008. The Dow Jones Industrial Average fell 777.68 points in intra-day trading. ... But the stresses that led to the crash had been building for a long time. On October 9, 2007, the Dow hit its pre-recession high and closed at 14,164.43.
Wars, Student Loans, Un paid Mortgages, Corruption among State Goverments all of them are major causes of Financial crisis among all the countries including USA. Regards
If the stock markets are still considered a barometer of the state of the economy, then the forecasts of the stock market on the stock markets for 2019 are not the best. Currently, from many macroeconomic analyzes, it follows that after several previous years of improving economic growth in the current year 2019, economic growth will slow down in many countries. Do you agree with these reports? Have you met in your country with specific signs confirming the above thesis that in 2019 the economic growth will most likely slow down? If so, what are the symptoms of the projected slowdown in economic growth, which would suggest that in 2019 the economic slowdown will most likely slow down?
Please reply
Best wishes
All world financial crises are made by the main super powers of the world because the dominate the world markets to serve their own interests.
Hello Professor Dariusz Prokopowicz and interested colleagues,
Regarding your question whether a global financial crisis is imminent in the near future, together with my research assistant Zachary Timmerman, we prepared three graphs of the three major stock market indices: the Dow Jones Industrial Average, the Standard & Poors Index (S&P 500), and the NASDAQ Composite Index. These US stock market indices can be used as best predictors for future economic activity. We detrended the data using the Hodrick-Prescott method and we presented the results in the three graphs attached. Starting from 2000 the graphs include the stock indices time-series variables, the Hodrick-Prescott trend, and lastly, the detrended series or cyclical component denoted by "Cycle" in the graphs. You can observe that there is indeed concern regarding recent excessive fluctuation in the cyclical components of the time-series, which resembles the 2008-2009 financial crisis. We labeled the turning points of the three indices to indicate the exact date that the turning points occur. These are Oct. 1 2018, Aug. 1 2018, and Aug. 1 2018 for Dow Jones, S&P500, and the NASDAQ Composite, respectively. However, all three stock indices reversed on Jan. 1 2019, Dec. 1 2018, and Dec. 1 2018 for all three indices. None of the three stock price indices came back to their recent peak values. Please see the graphs attached. Whereas the financial crisis is still a threat to the world economy, by no means is this a certainty. Although we have many negatives in the global economy that serve as future indicators of a potential financial crisis, there are, however, several responses to those threats undertaken by major global economies, such as major fiscal stimulus by China, and reversal of monetary policies of major world central banks, from hawkish to dovish.
Kind regards, Professor George K. Zestos and Zach Timmerman
The above discussion inspired me to the following considerations:
Was the picture of the sources of the global financial crisis presented in the media fully objective?
In the situation when a global financial crisis appeared in the autumn of 2008, a long-time public discussion on the sources of this crisis, explaining its development and pointing to the need to improve credit risk management procedures began in the media.
In the course of numerous analyzes carried out after 2008, many irregularities in the functioning of investment banking operating on capital markets in 2006-2008, investing in high-risk securities and their derivatives, were diagnosed. In addition, the institutions of supervision over financial systems did not notice many irregularities in the process of granting mortgage loans and in the rating agencies issuing too high, overly optimistic assessments for investment banks located in the forfeiture, sold for not fully informed about a high level of credit risk for investors, which were offered securities, credit derivatives, subprime bonds. Financial system supervisors also did not notice high systemic risk in a situation where a significant part of all mortgage loans in developed countries with the Anglo-Saxon model of the financial system were insured by a few insurance companies. Financial institutions also did not notice unethical practices of selling investment banks to investors of securities, whose valuation on securities markets was significantly overvalued and in the situation when the global financial crisis occurred, these securities were almost nothing or nothing worth buying.
The global financial crisis in 2008 was the reason for increasing the scale of interventionist economic policies in developed countries. The main instrument of this policy was the significant development of a mild monetary policy and interventionist measures aimed at forcing the restructuring processes of heavily indebted enterprises and stop-ping the decline in lending by commercial banks. As part of the pro-development activities of the state intervention, the Federal Reserve Bank applied a mild monetary policy of low interest rates and a program for activating lending and maintaining liquidity in the financial system by financing the purchase from commercial banks of the most en-dangered assets. A few years later, the European Central Bank applied the same activities of activation monetary policy. The functioning of the financial system will not be fully corrected as long as there will be a message in the media encouraging the banks that the global financial crisis is primarily attributable to the Federal Reserve Bank in the USA. In many para-documentary films, which, as a para-scientific explanation and education of citizens, pro-mote the philosophy of combining deregulation of financial markets with the development of a free market, and attempts to regulate markets are trying to implement the principles of real socialism, a system quite different from that considered an ultramarine US economy.
Do you agree with my opinion?
Therefore, I am asking you with the following query:
Was the picture of the sources of the global financial crisis presented in the media fully objective?
Dear Friends and Colleagues of RG
I described the problem of "Anti-crisis state intervention and created in media images of global financial crisis" in the publication:
Article Anti-crisis state intervention and created in media images o...
Please reply
Best wishes
Dear Friends and Colleagues of RG
I conduct research in key aspects of this issue. The results of these tests are described in the following publications:
The issue of the impact of monetary policy on the stability of financial systems in the context of the global financial crisis is described in the publication:
Article ACTIVATING INTERVENTIONIST MONETARY POLICY OF THE EUROPEAN C...
Article A safe monetary central banking policy as a significant inst...
Article Anti-crisis state intervention and created in media images o...
Article Soft monetary central banking policy and Plan for Responsibl...
I invite you to discussion and cooperation.
Best wishes
The issues of risk management in the context of determinants of the global financial crisis are described in the publications:
Article APPLICATION OF DATA BASE SYSTEMS BIG DATA AND BUSINESS INTEL...
Article GLOBALIZATIONAL AND NORMATIVE DETERMINANTS OF THE IMPROVEMEN...
Article Determinants of credit risk management in the context of the...
Article Importance and implementation of improvement process of prud...
Article The role and application of Keynesian macroeconomic anti-cri...
Article THE SHADOW BANKING AS AN EXAMPLE OF INEFFICIENCIES IN THE FU...
I invite you to discussion and cooperation.
Best wishes
Apparently more and more publications appear suggesting an imminent next global financial crisis. Has any of you described this issue in a scientific publication in terms of prognosis?
Please reply
I invite you to discussion and scientific cooperation
Best wishes
In the context of the above considerations, the following question is also current:
Why after 2008 the functioning of financial systems has not been improved?
The key questions for the functioning of domestic and international financial markets are as follows:
- Why after 2008 the functioning of financial systems has not been improved and the same factors of systemic credit risk still work, and there is still a high probability of generating another global financial crisis?
- How does the lack of improvement of prudential instruments and failure to carry out the necessary improvement of the credit risk management process increase the scope of potential systemic credit risk in the sphere of financial systems, including banking systems with particular focus on investment banking?
- How to improve the functioning of financial systems, how to improve the investment banking activity to increase the security of financial systems to reduce the likelihood of the emergence of another global financial crisis?
- How should the process of necessary improvement of credit risk management be carried out in order to increase the security of financial systems, including banking systems with particular emphasis on investment banking?
In my publications (listed below) I answer these questions.In the context of the development of international capital markets, the development of stock exchanges, increasingly globalized and related, the importance of globalization of financial markets, including capital markets and stock exchanges, is increasing.
On these capital markets, there are also increasingly large, internationally operating investment banks and investment funds, whose profits generate increasingly from speculative transactions of securities issued by companies and the public sector, including also Treasury bonds of other countries.
In addition, currency markets are growing, on which speculatively operating internecional banks and hedge investment and investment funds also speculatively. Before the emergence of the global financial crisis in 2008, it was mainly investment banking that approved the excessive levels of credit risk and speculative, too high, overvalued valuations of securities on stock exchanges. The problem of accepting an excessively high level of credit risk also concerned the sale of mortgage loans by deposit and credit institutions institutionally prolonged with investment banking, which was enabled in the mid-1990s by liquidating the prudential regulation of the Glass Stegall Act established after the Great Depression of 1929 in order to raise security of the banking and financial system.Establishment of investment banking, wanting to lose responsibility for generating the global financial crisis, blamed the central banking system, suggesting that the central bank is responsible for the financial crisis because it maintained low interest rates for many years.
Paradoxically, this central bank, ie the Federal Reserve Bank in the USA and the European Central Bank in the Eurozone by buying out from the threatened bankruptcy of commercial banks most at risk of insolvency of credit assets saved the financial sector from total destabilization, from loss of citizens' trust for the banking system and thus by taking the responsibility from the management of investment banks for generating the global financial crisis. Thanks to this, it was possible not to improve prudential systems, financial systems not cured of the disease known as the ease of falling into serious financial crises, each of which is increasingly serious and increasingly the costs of saving the banking system through total destabilization and necessary restructuring are shifted to society.
The recent global financial crisis that appeared in autumn 2008 was an example of the increase in potential systemic credit risk in many countries in which the governments of these countries through the issue of government bonds and their sale to foreign investors led to a significant increase in the risk of a liquidity crisis in the state finances and in many smaller economies, they generated major crises in the debt of state finances.
Do you agree with my opinion?
In view of the above, I am asking you the following question: Why after 2008 the functioning of financial systems has not been improved?
Please reply
I invite you to discussion and scientific cooperation
Dear Friends and Colleagues of RG
The issues of risk management in the context of determinants of the global financial crisis, globalization processes, technological progress and other factors I described in the publications:
Article Anti-crisis state intervention and created in media images o...
Article Soft monetary central banking policy and Plan for Responsibl...
Article APPLICATION OF DATA BASE SYSTEMS BIG DATA AND BUSINESS INTEL...
Article GLOBALIZATIONAL AND NORMATIVE DETERMINANTS OF THE IMPROVEMEN...
Article Determinants of credit risk management in the context of the...
Article Importance and implementation of improvement process of prud...
Article The role and application of Keynesian macroeconomic anti-cri...
Article THE SHADOW BANKING AS AN EXAMPLE OF INEFFICIENCIES IN THE FU...
Article ACTIVATING INTERVENTIONIST MONETARY POLICY OF THE EUROPEAN C...
Article A safe monetary central banking policy as a significant inst...
I invite you to discussion and cooperation.
Best wishes
In the context of the above considerations, the following question is also current:
Has the slowdown in economic growth that appeared since the last quarter of 2018 be a prelude to the next financial crisis?
Does the slowdown in economic growth that has occurred since the last quarter of 2018 may generate further negative aspects related to the limitation of export production, falling investment, consumption, increased investment and credit risk, etc. and can significantly increase the likelihood of another financial and economic crisis?
Please reply
Best wishes
What you have concluded is absolutely right. However, the main culprit is always uncanny maneuvers of political figures in adopting unjustified interventionist tactics in controlling economic indices such as the rate of tariffs, imposition of sanctions, etc.
I think that that are many reasons. The global financial system does not look healthy. Many countries with a very high resource base (like Russia, Brazil, Iran, Venezuela, etc) have a very volatile currency. At the same time, the USA has an increasing debt and no real resources (also in production) to cover the global mass of dollars.
There are also bubbles in the pricing of real estate, also because of complexity of land rent (even without mortgage crisis like in 2008 in the USA). See some of my ideas here:
Conference Paper Aggregate and Average Land Rent in Cities
One more reason is microeconomic and is related to non-uniqueness of value detemination. Some of my ideas are here: Preprint Valuation of Unique Objects: The Role of Heterogeneity and Information
World wars between the major powers lead to financial crises and not a single crisis, whose effects are reflected in the Middle East, specifically the Arab and Islamic countries.
I strongly believe that these will contribute to global financial crisis :
** Advancement of science and technology will cut off the number of employment rate especially in developing countries including Ghana.
** High rate of importation of goods and services.
** Love for power which will result in wars between Sister countries.
Therefore, in the context of the above considerations, the following important question appears:
What will be the main sources of the next global financial and economic crisis?
What will be the main sources of the next global financial and economic crisis, which could be faring in the next dozen or so years?
Will they be analogous to the crisis source as in the situation of previous global financial and economic crises?
Will the next global economic crisis be triggered by the financial crisis?
Will the next financial crisis be started similarly to the previous bankruptcy by a large financial institution, a large bank or a corporation?
Will the declaration of bankruptcy by a large business entity trigger strong drops in over-valued securities on securities exchanges?
However, will such huge reserves of money be accumulated in central banks, including those reprinted on a regular basis, that in the situation of potential loss of liquidity by a large, economic entity, the economy will not fail because it will be saved from bankruptcy in the framework of state aid, as part of state intervention?
Is the principle still valid that "the big one can not get stuck" because it will be saved by the government to prevent the emergence of a new large scale of the financial and economic crisis?
Or maybe in the perspective of the next years will also be completely different factors that generate a decline in economic efficiency and a deterioration in the emergence of a crisis in real economies?
Can the next global economic crisis be determined by adverse climate changes, the global warming process?
Please reply
I invite you to the discussion
Thank you very much for your response and participation in the discussion
Best wishes
Rising prices of commodities, currencies, fluctuations in stock market prices and instability, global unemployment, inflation, or surplus
it is difficult to even understand, what an economic crisis means today. Some countries also facing huge competition of Asian countries, particular China, but also others. For the old industrial nations it become obvious that they lack more and more comparative advantages. For them an economic crisis has started, while for others economic expansions is continuing. China has so many people that its workforce, if further modernized can produce world production of many commodities. In 10 years technological and skills gaps that still might exist will become smaller. This will have also huge impacts on financial markets. It might happen that the crisis in the traditional industrial nations becomes bigger and in the NICs it continues to go smoothly and economies are further expanding. If we call this a global crisis, yes.
Capitalism - When the 25% wealthiest in the world still unhappy with their possession.
In the context of the above discussion, another question arises:
Have the credit risk management systems in investment banking been improved over the past few years, i.e. improved economic growth in developed economies?
Has the risk of the emergence of another financial crisis, i.e. similar to that which occurred in 2008, been significantly reduced through the use of specific system instruments increasing the level of security of financial systems or has this risk not changed?
What do you think about this topic?
What is your opinion on this topic?
Do you agree with me on the above?
Please reply
In the context of the above interesting discussion, I ask the following question: Does improving credit risk management processes reduce the likelihood of the next global financial crisis? Over 10 years have passed since the appearance of the previous global financial crisis in 2008. Has the operation of investment banks sufficiently improved in this period transactions in credit, derivative and securities markets to such an extent that the risk of the next global financial crisis is much lower than over 10 years ago? The improvement of specific risk management systems is particularly important in many areas of functioning of commercially operating business entities, financial institutions, public institutions as well as conducting investment, research and other projects. How important it is, for example, it was shown by the global financial crisis that appeared in mid-September 2008, when certain financial, investment and credit risk management systems were not properly improved and investment procedures, including credit procedures, were not reliably implemented. as well as customer service, and breaking the rules of business ethics in investment banks operating at that time and many other types of financial institutions and business entities. Or maybe the real economy has already accumulated too large boom factors that mean a permanent, long-term slowdown in economic growth in at least the next few years and the crisis is inevitable despite the improvement of transaction procedures in banks and improvement of the credit risk management process? Does any of you examine this issue in the context of analyzing sources, factors of financial and economic crises? I am researching this issue and invite you to cooperation. I described the results of my research in scientific publications that are available on the Research Gate website. I invite you to cooperation.
Please reply
I invite you to discussion
Thank you very much
Best wishes
Dariusz Prokopowicz
Dear Colleagues and Friends from RG, Development of the Koronavirus pandemic causing Covid-19 disease in 2020, the economic growth rate of the global economy will fall sharply, perhaps to recession levels. The crisis will cause economic and public sector finance crises in many countries. Some think tanks estimate that the global economic crisis and recession in 2020 may be the most serious since World War II. National governments are launching fiscal interventionist anti-crisis programs to help businesses and citizens. Central banks also ease monetary policies, lower interest rates, release reserves, increasing liquidity in the government's finance sectors and in commercial bank sectors. However, these are significantly different interventionist, anti-crisis programs to help the national economy relative to those that were used after the appearance of the global financial crisis in September 2008. The current economic crisis has been generated by completely different sources than the global financial crisis of 2008. The global financial crisis that began in mid-September 2008 since the bankruptcy was declared by the fourth largest investment bank in the world, i.e. Lehman Brothers, was an investment and commercial banking crisis generated by taking credit transactions and using securities with the acceptance of too high credit risk . The current economic crisis is a crisis of supply and / or demand shock, depending on a given industry, sector, branches of the economy, in which the demand for specific services decreases strongly (e.g. tourist, hotel, catering services etc.) or the supply drops significantly some assortments of manufactured products (e.g. due to the lack of supplied components whose production has been suspended due to the development of the Koronavirus epidemic). It is not certain, therefore, that the interventionist government programs used to maintain liquidity in the public finance sectors and to maintain the economic situation in commercial sectors do not have to fully operate in line with the adopted objectives of applying these rescue crisis programs.
The above discussion inspired me to formulate the following question: Will the situation when the launched government interventionist anti-crisis programs to maintain liquidity in the public finance sectors and maintain the economic situation in commercial sectors not work in line with the adopted objectives and when the global economy enters the phase of a several percent recession, will the global demand and supply shock cause such a strong imbalance in the real economy markets that will lead to a global financial crisis in commercial financial sectors?
Please reply.
Thank you very much.
Best wishes.
Dariusz Prokopowicz
A lot has changed from March 2020 until now. The high-budget anti-crisis instruments of interventionist socio-economic and social policy introduced in some countries, i.e. primarily the so-called Anti-crisis shields, consisting in granting financial subsidies for companies (and exemption from paying para-tax burdens, social security contributions, additional remuneration of employees in companies operating commercially from state budget funds and / or money obtained through additional issues of state treasury bonds) allowed for a significant reduction in the scale of employment reductions caused by the earlier introduction of anti-pandemic safety instruments (temporary suspension of the economic activity of many shops, shopping centers, cultural institutions, service establishments, and, in addition, a significant part of production companies limited their production). In this way, it was possible to limit the scale of the increase in unemployment. Interventionist programs of socio-economic and social policy implemented in this way resulted in a significant increase in the indebtedness of the state finance system, and in a situation of stimulating demand and consumption by easing monetary policy, they may also cause an increase in inflation. However, these are economic problems considered to be less important in view of the potential, strong increase in unemployment that would occur in the event of failure to implement the above-mentioned anti-crisis socio-economic and social policy. Therefore, the scale of the decline in economic growth in many countries will be smaller than originally, ie in March - April it was forecast. In view of the above, also the previously forecasted economic crisis, which was to appear in 2020, was indirectly caused by the development of the SARS-CoV-2 coronavirus pandemic (causing the Covid-19 disease), which was to turn into a strong recession in many countries, estimated at several to several percent . decline in GDP against 2019 will also be more moderate. In March 2020, there were opinions that the 2020 economic crisis could be comparable to the Great Depression (Great Depression) of the 1930s. However, the currently formulated forecasts suggest a much lower level of GDP decline in many countries and on a global scale. Unless the so-called the second wave of the Coronavirus pandemic, which is expected to appear at the end of 2020, will have analogous and / or similar economic effects to the pandemic of the first half of 2020, then another adjustment of the economic development forecasts for individual countries and on a global scale will take place. In such a scenario, the economic recession at the end of 2020 could deepen and the possibility of financing the next so-called Crisis shields financed from the funds of the state public finance system would be much more limited than at present. In individual countries, these possibilities will be different, which is mainly related to the different level of indebtedness of the public finance system of the state, i.e. different levels of public debt and budget deficit related to GDP.
What's your opinion on this topic?
I am asking for an answer and invite you to the discussion,
Thank you very much and best regards,
Dariusz Prokopowicz
Due to this COVID19 the entire world is suffered from both financially as well the economical crises which may lead to big black block in the path of development of nation.
I am in agreement with Tanvir Singh the Covid-19 has halted almost every economic activity globally and if virtual activities are not embedded seriously will lead to economic crunch globally and national development will not be underpinned.
Yes, the current SARS-CoV-2 (Covid-19) coronavirus pandemic is a direct and indirect major factor in the downturn in the global economy.
Thank you for participating in the discussion. I am very glad that the discussion on this important topic is developing. Best wishes,
Dariusz Prokopowicz
Dear Tanvir Singh, Thank you very much. Best wishes, Have a nice day
Dariusz Prokopowicz
If the current (February 2021) programs for vaccinating citizens against the SARS-CoV-2 (Covid-19) coronavirus cause the majority of the global population to be vaccinated in the second half of 2021, the world will emerge from the health and economic crisis in the next few months. Thus, from mid-2021, many countries will experience accelerated economic growth and recovery from the economic recession. If this positive scenario materializes, the risk of another global financial crisis emerging in the next few months and possibly also the next few quarters and years is relatively small.
Do you agree with my opinion on this matter?
Have a nice day, Stay healthy! Best wishes,
Dariusz Prokopowicz
Dariusz Prokopowicz : I have a much less positive outlook, but would like to separate the topics pandemic and economy for a moment. The pandemic is far from over: Even the richest countries in the world are struggling to vaccinate their people. A case in point is Switzerland where the entire population will not be vaccinated before the end of 2021. Secondly, Third World countries will struggle for years to come to get their vaccination programs through. So, while the rich west may be able to travel again soon, there will be major disruptions in the rest of the world. Third, until the entire world population is vaccinated, we'll see more and more mutations popping up. And they could be potentially much more infectious and deadly than the existing ones. It's just a matter of probability.
If we turn to the economy, we'll soon understand that the damage is done. The US has a record number of unemployed, all the stimulus created has extremely little effect as it goes to consumption rather than investments. Hundreds of thousands of businesses went bust. Germany recently warned that 65% of ALL retail business will vanish soon. Supply lines have been already cut or are on the brink of being destroyed, leaving just-in-time production highly vulnerable.
But let's assume business will pick up any time soon again, what will happen to all the debt that governments have piled up and the money they have printed? History as shown that there are just two solutions: deflation or devaluation. Deflation would mean to increase interest rates, potentially suffocating a recovering economy, causing a prolonged recession, potentially even depression. Decades of austerity would lie ahead. That leaves us with devaluation. Here, a haircut across all debt is conceivable. But this is tantamount to a haircut across all assets. Hence, the majority of people and entities will lose big parts of their assets. Think of what would happen to the savings of ordinary middle class people, but also pensions funds or the assets of banks.
Of course there is also a third solution: do nothing about debt and money supply, just print more. For this scenario one can open the history books and look at Germany and Austria in the 1920s...
In a nutshell, I'm extremely bearish for the entire world economy. The choice is between a managed deflation or devaluation or sliding down the hyperinflationary path.
Dear Patrick Schueffel,
Yes, the problem is complex. On the one hand, vaccination of citizens against the SARS-CoV-2 (Covid-19) coronavirus is carried out in order to solve the pandemic problem as soon as possible. On the other hand, various instruments of anti-crisis socio-economic policy are used to bring economies out of recession as soon as possible. It is not easy to carry out these various programs and anti-crisis measures at the same time.
Best wishes,
Dariusz Prokopowicz
The deep recession of the global economy that occurred in the second quarter of 2020 was caused by a shock on the financial markets, a short-term but strong stock market crash that occurred when the World Health Organization announced the state of a global epidemic, i.e. the SARS-CoV-2 (Covid-19) coronavirus pandemic. At that time, i.e. in March and April 2020, the economic forecasts for the following quarters were very pessimistic. Most forecasts then suggested that the recession of the global economy for the entire year 2020 may even be minus ten percent. global GDP. The very pessimistic forecasts of the macroeconomic economic situation also resulted from the economic lockdowns that were introduced for the first time in many sectoral countries or nationwide. At that time, there was a high increase in investment and economic risk in many markets and in many aspects of economic activities carried out in companies and financial institutions. There was a high risk of bankruptcy by various companies and financial institutions. This risk was quickly mitigated by the interest rate cuts made by a significant proportion of central banks in developed and developing countries. In addition, the scale of the economic recession was limited by the launch of interventionist, anti-crisis socio-economic policy programs, under which economic entities were offered public financial aid. State aid consisted mainly in granting subsidies to commercially operating companies, which were allocated to subsidizing the salaries of employees employed in companies and enterprises, refinancing the fixed costs of business activity, temporary exemptions from paying social security contributions, granting loans on preferential or non-returnable terms, etc. In this way, the risk of bankruptcy of many companies, corporations and financial institutions has been significantly reduced. Thus, the risk of a financial crisis has been significantly reduced.
Best wishes,
Dariusz Prokopowicz