World heading for financial crisis worse than in 2008 — China’s Dagong rating agency head
by Dave Kranzler, Investment Research Dynamics
Primo Piatto Et Secondo Piatto:
I have been suggesting for quite some time that what we saw in 2008 was just the appetizer ahead of the main course. Globally, including and especially in the U.S., the level of debt and derivatives stashed way on big bank, hedge fund and financial firm (insurance companies, mutual funds, public pension funds) balance sheets is staggering. Multiples of what it was in 2008.
Fuses have been lit all over the globe, including crashing currencies, collapsing industries (think: oil shale/fracking) and de facto defaulting sovereign debt. Even the U.S. Government has de facto defaulted on its debt because the only way it makes payments are via money printing and forced rollover by existing holders.
The head of China’s Dagong Rating Agency has finally stated the obvious in a public forum:
I believe we’ll have to face a new world financial crisis in the next few years… the situation is even worse than ahead of 2008.
The world economy may slip into a new global financial crisis in the next few years, China’s Dagong Rating Agency Head Guan Jianzhong said in an interview with TASS news agency on Wednesday. “I believe we’ll have to face a new world financial crisis in the next few years. It is difficult to give the exact time but all the signs are present, such as the growing volume of debts and the unsteady development of the economies of the US, the EU, China and some other developing countries,” he said, adding the situation is even worse than ahead of 2008.” “The current crisis in Russia is caused by Western countries’ sanctions rather than internal factors. If we look at the US and the EU countries, their crises were caused by internal and not external factors,” the president of China’s Dagong rating agency said. “As distinct from Russia, the scope of crediting in these countries exceeded the potential for the production of goods and created a bubble. This crisis was transmitted to the entire world through the policy of quantitative easing and the use of the printing press. All the countries had to pay for that,” he said. A setback in the growth model focused on credit-based consumption may become a source of a new crisis, he said. “Developed countries, including the US and the EU, remain the main consumers. But these countries develop only if there is consumer demand while the main potential for this consumption is based on borrowings. The US, the EU and Japan are increasing consumption through growth in crediting, which poses a risk,” he said. Some emerging market countries have also been increasing consumption through crediting in recent years and the global economy has been based on the model that promotes consumption through funds that will be earned in the future,” the head of China’s Dagong rating agency said.