We are now in a post-crisis period. Yet, looking back to between
1945 and 2008, we see that the frequency of financial crises and
recessions is quite high: on average, there is one crisis every 58
months (using data from the US National Bureau of Economic
Research). In other words, statistically speaking we should expect the beginning of the next crisis in April 2015, which would end by March 2016. So are we in a post- or a pre-crisis period?
I do not want to be the bearer of ill tidings, but I think we should always wonder what the cause of the next crisis will be. There is no single episode of financial panic in the last 50 years that could not have been prevented. This time, let us look ahead, not react after the crisis.
The world economy is now more interconnected than ever. Financial markets are heavily regulated while capital markets are expanding in Asia, Africa and Latin America. The banking sector is going through a concentration process with fewer and fewer players left. Mexico, Indonesia, Nigeria and Turkey (the MINT countries) are coming into focus after Brazil, Russia, India, China and South Africa (the BRICS) have disappointed.
Europe seems to be back in the game, with Germany leading the recovery of the continent.
The US is still the world's most competitive economy, according to the IMD World Competitiveness Ranking
The process of deleveraging the balance sheets of governments and companies is under way. Interest rates and government bond yields are at historical lows and stock markets have recovered to pre-crisis levels.
So what is there to worry about? There are eight possible scenarios that could cause the next crisis, none more important or likely than the others. For some, prevention is straightforward. For others, I am not sure there is much we can do. Some of them represent imminent threats. A few are more long-term, less dramatic sources of instability.
Research). In other words, statistically speaking we should expect the beginning of the next crisis in April 2015, which would end by March 2016. So are we in a post- or a pre-crisis period?
I do not want to be the bearer of ill tidings, but I think we should always wonder what the cause of the next crisis will be. There is no single episode of financial panic in the last 50 years that could not have been prevented. This time, let us look ahead, not react after the crisis.
The world economy is now more interconnected than ever. Financial markets are heavily regulated while capital markets are expanding in Asia, Africa and Latin America. The banking sector is going through a concentration process with fewer and fewer players left. Mexico, Indonesia, Nigeria and Turkey (the MINT countries) are coming into focus after Brazil, Russia, India, China and South Africa (the BRICS) have disappointed.
Europe seems to be back in the game, with Germany leading the recovery of the continent.
The US is still the world's most competitive economy, according to the IMD World Competitiveness Ranking
The process of deleveraging the balance sheets of governments and companies is under way. Interest rates and government bond yields are at historical lows and stock markets have recovered to pre-crisis levels.
So what is there to worry about? There are eight possible scenarios that could cause the next crisis, none more important or likely than the others. For some, prevention is straightforward. For others, I am not sure there is much we can do. Some of them represent imminent threats. A few are more long-term, less dramatic sources of instability.
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