Experts are of the opinion that the
world economy is heading towards a situation that is more or less similar to
the financial meltdown that took place in 2008 through 2009. The warning was
given by Gordon Brown, the former prime minister. It is also being anticipated
that the world economy is becoming even more vulnerable with every passing day.
Brown went on to say and offered a “scathing
analysis” of how things had not been resolved and continued to lie unattended
since the meltdown took place in 2008-2009.
analysis” of how things had not been resolved and continued to lie unattended
since the meltdown took place in 2008-2009.
Brown was stated as saying “We are indanger of sleepwalking into a future crisis”. Unless there is change in the
approach and the manner in which these problems are addressed, chances of a
repeat 2008 are very high. Also, he cited that the chances of interest rates
reducing are far less now as compared to what it was a decade back.
approach and the manner in which these problems are addressed, chances of a
repeat 2008 are very high. Also, he cited that the chances of interest rates
reducing are far less now as compared to what it was a decade back.
There was no guarantee that finance
ministries across the globe would be allowed to enhance public spending or for
that matter cut back on taxes. Most importantly, there was no guarantee that
China would play an instrumental role in offering stimulus towards the same.
ministries across the globe would be allowed to enhance public spending or for
that matter cut back on taxes. Most importantly, there was no guarantee that
China would play an instrumental role in offering stimulus towards the same.
Brown also went on to say that “Trump’s
protectionism is the biggest barrier to building international cooperation”. Since
a lot is being said about the trade war and was launched by the United States
against Beijing, China, it is being anticipated that China may not be as
cooperative as expected following this exercise.
protectionism is the biggest barrier to building international cooperation”. Since
a lot is being said about the trade war and was launched by the United States
against Beijing, China, it is being anticipated that China may not be as
cooperative as expected following this exercise.
Brown also went on to say that due to
the lack of “warning system” that monitors the flow of finances in various
sectors of the economy; the meltdown may assume a greater shape. Also, had the
monitoring system been in place, it would have been easier to deal with the
impending crisis and work out terms to tame the same.
the lack of “warning system” that monitors the flow of finances in various
sectors of the economy; the meltdown may assume a greater shape. Also, had the
monitoring system been in place, it would have been easier to deal with the
impending crisis and work out terms to tame the same.
Ever since, experts have got a clue
about the impending financial crisis, it is being said that the banking system
has undergone some change. For instance, the banks are being asked to hold on
to their capital so that in the wake of possible losses, these banks can be
protected. As such, a system of bonuses has been launched so that bankers do
not get tempted and can prevent themselves from incurring losses.
about the impending financial crisis, it is being said that the banking system
has undergone some change. For instance, the banks are being asked to hold on
to their capital so that in the wake of possible losses, these banks can be
protected. As such, a system of bonuses has been launched so that bankers do
not get tempted and can prevent themselves from incurring losses.
Housing market – the root cause for 2008 meltdown
The financial crisis that caused
upheavals in the economies across the world was mainly due to the housing
market bubble that burst leading to subprime mortgage crisis, which led to the
downfall of Lehmans. However, Brown was of the opinion that it is quite likely
that the reason may not be the housing market this time but causes other than
that.
upheavals in the economies across the world was mainly due to the housing
market bubble that burst leading to subprime mortgage crisis, which led to the
downfall of Lehmans. However, Brown was of the opinion that it is quite likely
that the reason may not be the housing market this time but causes other than
that.
He also went on to say that “In thenext crisis a breakdown of trust in the financial sector would be mirrored bybreakdown in trust between governments”. Most importantly, chances are less
likely that there will be cooperation among all like before, instead, the blame
game maybe pronounced.
likely that there will be cooperation among all like before, instead, the blame
game maybe pronounced.
He also went on to say that the
tendency to borrow from other governments was not of much help because the stimulus
was not adequate and as such, it failed to foster growth of the economy.
tendency to borrow from other governments was not of much help because the stimulus
was not adequate and as such, it failed to foster growth of the economy.
When
he was asked the consequences that UK might suffer due to the “loosening of
regulations” by the US government, his spokesperson stated “In recent years we
have reformed regulation of the city, and put in place an incredibly robust
system, one of the most robust in the world, at the same time making sure it’s
global competitive. We’ve taken action ourselves to make sure that our system
is resilient and robust”.
he was asked the consequences that UK might suffer due to the “loosening of
regulations” by the US government, his spokesperson stated “In recent years we
have reformed regulation of the city, and put in place an incredibly robust
system, one of the most robust in the world, at the same time making sure it’s
global competitive. We’ve taken action ourselves to make sure that our system
is resilient and robust”.
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