When will the next worldwide financial crisis happen? Could 2007 happen again?

Train Dragon

I was watching The Big Short last night and I thought to myself: "could this happen again?"

I was also reading online a few months ago that the Italian banks are in trouble and if they fail it will have a domino effect worldwide.

I also think the Irish property market is wildly inflated.

When will we see another crash?

super_furry

It'll be 2007 times 100!

200700!

petrolcan

What an odd first post.

Train Dragon

petrolcan:

It's probably more thought provoking than "Where are you right now?"

ygolometsipe

Train Dragon wrote: »

I was watching The Big Short last night and I thought to myself: "could this happen again?
Is another crash coming?

I think it's not an "if" but a when. Nothing got fixed since 2008 a few minor slaps on banker bonuses but that's it.
Donald Trump wants less regulation for the banks.
It's primed to collapse again. We have had a recession every 8 years or so since about 1930. This time the central bank can't do anything to cut interest rates as they are already too low.
We will have high inflation soon as everyone wants a house and nothing else.
We're already all loosing money to quantative easing, no interest on savings etc.

kjl

Student load debt is rising and being sold off as bonds similar to sub prime mortgages. But how can a student pay off his debt if going to college doesn't guaranty you a job.

osmiumartist

Train Dragon wrote: »

It's probably more thought provoking than

There's a man who doesn't know his audience...

The Moldy Gowl

Probably not for another long time. Nothing to the extent of 2008 anyway. There will be recessions every decade or so like usual.

As much as people don't want to think, there is a lot of auditing and new regulations in the finance market these days.

Would have to be another perfect storm for it to happen.

josha1

super_furry wrote: »

It'll be 2007 times 100!

200700!

Wouldn't that be 1.873057e+161?

Train Dragon

"Donald Trump wants less regulation for the banks"

So that's how he got in.

ygolometsipe

Train Dragon wrote: »

"Donald Trump wants less regulation for the banks"

So that's how he got in.

Yeah here it is the Dodd-Frank act.
https://en.m.wikipedia.org/wiki/Dodd–Frank_Wall_Street_Reform_and_Consumer_Protection_Act

There's a financial times article but it's pay wall. You can web it though. Yeah he's appointing former bankers on his team.

Nobody can predict the future, it unfolds chaotically. If Irish people in 1993 could have seen how much the country changed by 1999 they would have been astounded.

Grayson

Roughly every 8 years since the great depression there's been a crash. The last one was 2008, not 2007. For example here's the Icelandic stock market during a 5 week period in 2008.
https://upload.wikimedia.org/wikipedia/commons/c/cb/OMX_Iceland_15_SEP-OCT_2008.png

The reason it hasn't happened this year is because all the controls that were put in place post 2008 such as quantitative easing, lower interest rates etc are still in place. That means that the markets are still being held in an "unnatural" state. However they're still pretty fragile.

Before a crash there are always certain warnings. You see the rich become very rich. As a consequence of that they start spending money like mad. Art, jewellery, precious stones and stuff like that reach prices that have never been seen before. The same happens to the stock market.

If you take a look at this graph you can see that the stock market is currently higher than it was during the last boom.

We will have another crash. It will probably happen next year or the year after depending on what Trump does. If he starts slapping on tariffs or starts a trade way it will be bad. In the short term his tax cuts will cause stocks to increase but most forcasters say that it will not be good in the long run.

SEPT 23 1989

The only reset after the printing machine last throw of the dice has failed is war

Mass youth unemployment across Europe

Perfect

Oodoov

The Moldy Gowl wrote: »

Probably not for another long time. Nothing to the extent of 2008 anyway. There will be recessions every decade or so like usual.

As much as people don't want to think, there is a lot of auditing and new regulations in the finance market these days.

Would have to be another perfect storm for it to happen.

I'd be very surprised if it's not a lot worse than 2008 tbh.

SEPT 23 1989

Oodoov wrote: »

I'd be very surprised if it's not a lot worse than 2008 tbh.

2008 was only a cushion

Train Dragon

I wonder will we ever see "run on the banks" type armageddon in our lifetime.

Train Dragon

Grayson, that was an excellent insight. Thanks.

Aloneagain

Grayson wrote: »

Roughly every 8 years.

Not quite correct, a recession cycle (bust to boom) lasts on average 21 years, 7 in cuts, 7 in growth and 7 in boom !

The Moldy Gowl

The Moldy Gowl wrote: »

Probably not for another long time. Nothing to the extent of 2008 anyway. There will be recessions every decade or so like usual.

As much as people don't want to think, there is a lot of auditing and new regulations in the finance market these days.

Would have to be another perfect storm for it to happen.

eh I hate to break the news so late to you but there was plenty of regulation and auditing in 2008

Yourself isit

[Deleted User] wrote: »

Nobody can predict the future, it unfolds chaotically. If Irish people in 1993 could have seen how much the country changed by 1999 they would have been astounded.

They did see it by living 6 years. Most of them.

Grayson

Deleted User wrote: »

eh I hate to break the news so late to you but there was plenty of regulation and auditing in 2008

And Trump wants to get rid of most of the regulations too.

Phoebas

Grayson wrote: »

If you take a look at this graph you can see that the stock market is currently higher than it was during the last boom.

If you look at this graph you can see that its currently higher than its ever been, and after every crash it has recovered and become stronger than its ever been. And that's not an indication of an impending crash - look at the pretty much uninterrupted growth in the 80s and 90s.
If you want to see a crash on the scale of the recent one, you need to go back to maybe the 70s oil crisis and then back again to the great depression.

I wouldn't be looking at the stock market for anything but very general trends.

Wanderer78

Train Dragon wrote:

I wonder will we ever see "run on the banks" type armageddon in our lifetime.

Oh yes it's on the way, that's if our deposits aren't 'bailed in' before we can get them. Time for a public banking system me thinks! Steve keen and Michael Hudson are probably worth keeping an eye on as well!

Train Dragon

Wanderer78 wrote: »

Steve keen and Michael Hudson are probably worth keeping an eye on as well!

I'll Google both, thanks.

pure.conya

Train Dragon wrote: »

I was watching The Big Short last night and I thought to myself: "could this happen again?"

I was also reading online a few months ago that the Italian banks are in trouble and if they fail it will have a domino effect worldwide.

I also think the Irish property market is wildly inflated.

When will we see another crash?

well seeing as how these crashes have come cyclically since the great depression then yes there will be another crash and some will help it along the way and profit handsomely from the chaos, exactly like the last robbery

Permabear

This post has been deleted.

Wanderer78

Train Dragon wrote:

This post had been deleted.

Naked capitalism is also a very good source, many post-Keynesian economist post there.

Permabear wrote:

This post has been deleted.

I'm not a big fan of the bank of international settlements myself, as they have a tendency to move the goal posts when they seem fit, but light touch regulation certainly didn't work

irlcncrk

I'm not one for graphs but from past experience, I'm not ancient, I've already seen 3 crashes 1970s, 1980s and our most recent one.

As a previous poster has stated economic events up to now have been cyclical and until Govts radically overhaul how countries and economies function I'd imagine these cycles will continue.

As a simple proof of the cycles, at the moment the various rental news stories are not being exaggerated. Rents are now definitely back up and even higher than they were in the boom times. There are small 3 bed town houses in my area renting for sometimes €500 per month more than they were in the good old days.

Property taxes and the govts 2 year rental terms have defo front loaded these increases, but sadly no one seems to have any sensible solutions no matter what side of the political divide they're on.

Politicians of all flavours will sound bite their way from one election to the next without achieving "real" and meaningful change.

Saw an interesting piece the other day that in most transactions from buying petrol, building or buying a house and paying your phone bill the revenue take a very sizeable chuck. Clearly taxes are needed but how it's collected and who pays what needs to be shaken up.

Why not simply raise corp tax by 1 or 2%. For corps this would be miniscule but would give great scope to both balance the books and review other streams.

Of course pointless raising more taxes unless we Joe and Josephine Citizen get much better value for our buck, there lies the real problem!

Wanderer78

irlcncrk wrote:

Why not simply raise corp tax by 1 or 2%. For corps this would be miniscule but would give great scope to both balance the books and review other streams.

I'm really liking David McWilliams fairly radical idea on how to deal with the corporation tax dilemma, I.e. the Irish government should become share holder's of the multinationals. We need to get more from these companies but if the eu raises the rate, they might start leaving

irlcncrk

Wanderer78 wrote: »

I'm really liking David McWilliams fairly radical idea on how to deal with the corporation tax dilemma, I.e. the Irish government should become share holder's of the multinationals. We need to get more from these companies but if the eu raises the rate, they might start leaving

Interesting idea but I wouldn't/don't have any confidence in our politicians/civil servants ability to work/manage share portfolios.

I could be completely wrong, but from my limited view of things they're not very proactive with "our" ownership of the banks.

They put NAMA in place to manage the whole property mess, maybe they just should have scuttled Anglo and refinanced the rest and left banks to manage their own property debts.

Always like listening to DMcW view of things. Sadly the lads/lassies on Kildare St didn't/don't, and I can't see that changing anytime soon.

Cina

My friend just bought a PS4 using his Christmas dole bonus.

We are doomed to make the same mistakes, of course it'll happen again.

Dohnjoe

ygolometsipe wrote: »

I think it's not an "if" but a when. Nothing got fixed since 2008 a few minor slaps on banker bonuses but that's it.

A lot has been fixed. There have also been pretty sweeping changes (still on-going) to banking across the world as a result of the 2007 FC. Regulations have tightened up significantly.. a lot of stuff that banks could do in 2006/2007 they simply can't do now

It wasn't a recession or an isolated or domestic crash - it was a world event on a a par with 1929, real edge of the abyss stuff

Can a systemic crash occur on that scale again? indeed, but despite the size of the 2007 crash and considering how unprepared and over-leveraged the world was - it still took the US only two and a half years to pull out of it

topper75

SEPT 23 1989 wrote: »

The only reset after the printing machine last throw of the dice has failed is war

Mass youth unemployment across Europe

Perfect

Yes but by the time the youth offer 8000000 euromarks for a gun, the price will have doubled. Thus preventing war.

Wanderer78

irlcncrk wrote: »

Interesting idea but I wouldn't/don't have any confidence in our politicians/civil servants ability to work/manage share portfolios.

I could be completely wrong, but from my limited view of things they're not very proactive with "our" ownership of the banks.

They put NAMA in place to manage the whole property mess, maybe they just should have scuttled Anglo and refinanced the rest and left banks to manage their own property debts.

Always like listening to DMcW view of things. Sadly the lads/lassies on Kildare St didn't/don't, and I can't see that changing anytime soon.

yea i can understand where you're coming in regards confidence but we have to try something, we cant keep taxing the public for our every need and leave large corporations walk away with massive profits. i understand they create a large amount of our employment amongst other things, but just like michael hudson explains very well how the fire sector(finance, insurance and real estate), is parasitic on society, i believe this is what's happening in our corporate sector. dmcw posted his radical idea in the financial times some time ago and got a very positive response from them, saying this is a very good solution, so maybe this is what we need to do!

our politicians are following fundamentally flawed economic theories and principles, largely from the chicago school of thought and the washington consensus, whereby theories and principles such as neoliberalism and neoclassical theory are king and are failing us badly. according to yanis varoufakis, many euro group leaders realise that their approach to dealing with the problems that have arisen since the crash, will simply not work. this has the potential to collapse the eu and cause widespread recession possibly even a depression.

i personally believe we re in desperate need of a public banking system in ireland, at least this would give a public option and some sort of protection from the greater economy. i believe our nationalised banks have never truly been working for the public because of the above mentioned issues, i.e. there has always been an entity of our banks preparing for re-privatisation, hence their outcome, amongst other things of course.

Train Dragon

Cina wrote: »

My friend just bought a PS4 using his Christmas dole bonus.

What the hell? How much is a Christmas Dole bonus these days?

josip

No matter how many economic "cycles" we go through the distribution of wealth becomes more and more unequal.
Only significant war disrupts this pattern.
Sorry.

Didas

Train Dragon wrote: »

What the hell? How much is a Christmas Dole bonus these days?

85% of their weekly dole payment. So typically 160 for over 25's and 85 for under 25's. Must have been a PS2 he bought :rolleyes:

Train Dragon

tonygun wrote: »

85% of their weekly dole payment. So typically 160 for over 25's and 85 for under 25's. Must have been a PS2 he bought :rolleyes:

I was thinking that. Unless he combined it with his normal week of Dole and blew the lot.

Wanderer78

josip wrote: »

No matter how many economic "cycles" we go through the distribution of wealth becomes more and more unequal.
Only significant war disrupts this pattern.
Sorry.

you do have a fair point but we have to try prevent this at all costs as with modern day weapons, you d have to wonder if we d survive. i feel theres an 'intellectual revolution' occuring, but its taking time for the ideas from these movements to come to the forefront.

daheff

Phoebas wrote: »

If you look at this graph you can see that its currently higher than its ever been, and after every crash it has recovered and become stronger than its ever been. And that's not an indication of an impending crash - look at the pretty much uninterrupted growth in the 80s and 90s.
If you want to see a crash on the scale of the recent one, you need to go back to maybe the 70s oil crisis and then back again to the great depression.

I wouldn't be looking at the stock market for anything but very general trends.

Take a look at the Nikkei (Japan) -not all markets will recover and become stronger after a bust

It had a high of almost 40,000 in 1989...its hovering around the 19,000 mark now

nelly17

McWilliams had a good article on the indo today about how Italy is likely to go tits up next year, and again the whole issue of contagion will arise

Train Dragon

nelly17 wrote: »

McWilliams had a good article on the indo today about how Italy is likely to go tits up next year, and again the whole issue of contagion will arise

I knew I hadn't dreamt the whole Italian banks thing. Thanks for the confirmation.

Wanderer78

Train Dragon wrote: »

I knew I hadn't dreamt the whole Italian banks thing. Thanks for the confirmation.

ellen brown has been writing about the problems in the italian banks for some time now. shes very quirky, highly criticised and can be conspiratorial from time to time, much to the annoyance to her colleagues at the public banking institute, but id still recommend her work.

Train Dragon

Question: if things do go slightly tits up again, will we see sanity coming back to the Irish property market?

Dohnjoe

Train Dragon wrote: »

I knew I hadn't dreamt the whole Italian banks thing. Thanks for the confirmation.

I work in the industry, the Italian bank situation has been known about for quite awhile now and we are watching it closely. It's definitely an issue considering recent events, but not what we would call significant in terms of global instability

People have a tendency to jump into threads like this predicting all sorts of scenarios, usually in line with their world views and/or popular misconceptions

The Big Short is a good film, I enjoyed it, but it's still Hollywood. Like I mentioned in a previous post, a large systemic crash could potentially happen again, but the industry (and world) is far more prepared than we were in 2007.

diomed

When things seem normal we are in a boom.
Things seem normal now.

The Dow Jones Index (DJIA) was 6,547.05 on 9th March 2009.
Today, 7th December 2016, the DJIA is 19,251.78, a rise of 194%
I expect the market to drop by about 45% to ~10,600.

The 1974 crash was big (and largely forgotten). The FTSE went to 146. Now it is 6,869.

ScumLord

The bottom line is what goes up, must come down. Capitalism depends on infinite growth which is obviously hitting a wall these days as we scrape the bottom of the earth's natural resources barrel.

The other thing is that there are people who make a lot of money from recessions, Everything becomes very cheap for people with money and you can be guaranteed they are sitting waiting for the next one to hit, if not actively trying to make it happen.

Wanderer78

Dohnjoe wrote: »

but the industry (and world) is far more prepared than we were in 2007.

id only have faith in that statement if something like the glass steagall act was reenacted

Wanderer78

Train Dragon wrote: »

Question: if things do go slightly tits up again, will we see sanity coming back to the Irish property market?

this might give you an indication in what some people are thinking about our housing crisis, a major cluster fcuk if you ask me:

https://soundcloud.com/irishtimes-politics/irelands-permanent-housing-crisis

ygolometsipe

Dohnjoe wrote: »

A lot has been fixed.

I understand your point about regulation but think about this.

In the movie, they explain Synthetic CDO's

SCDO's are just another type of derivative.

"The derivatives market is, in a word, gigantic, often estimated at more that $1.2 quadrillion. Some market analysts estimate the derivatives market at more than 10 times the size of the total world gross domestic product, or GDP.27 May 2015"

http://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp

You can ignore the "estimate" because its bull****, no one is able to calculate the total derivatives market its impossible.

This is only a small part of the pie, because when you add-in shadow banking
aka the ability to take out a loan without any loan backed security.

"The 26.3 trillion yuan ($3.9 trillion) worth of WMPs outstanding have emerged as key cog in China's so-called shadow banking system as investors often expect to be reimbursed for on any losses on the WMPs banks manage — an expectation that could weigh on the lenders if the products begin to sour."

https://www.bloomberg.com/news/articles/2016-09-07/four-fresh-worries-about-china-s-shadow-banking-system


Now in layman's terms a derivative is simply a contract that gets (derives) its value from something else. That something else is called an underlying.

So if you think about the world derivatives market, its possible that its all a stack of ****.

I could have created a financial product in 2007 and sold derivatives based on 10 year prediction. Someone else could have sold insurance on those products and someone else could have sold another product that doubles the loss if another unrelated product, say oil falls in value.
(Note: not all derivatives are bad, most are in fact vital)

Couple this with algorithmic trading and Trumps promise to repeal the
Dodd-Frank act

I will point out, I am not an expert so take my views with a large spoon of salt... oddly in my view the strongest economy in the next 5 years will be the EU.