The economist David Miles, who sits on the monetary policy committee of the Bank of England, may exaggerate when he forecasts financial crises every seven years, but most of the problems that caused the 2008 crisis — excessive borrowing, shadow banking and reckless lending — have not gone away. Too-big-to-fail banks have not shrunk; they’ve grown bigger. Huge bonuses that encourage reckless risk-taking by bankers remain the norm. Meanwhile, shadow banking — investment and lending services by financial institutions that act like banks, but with less supervision — has expanded in value to $71 trillion, from $59 trillion in 2008.
China maybe borrowing but it is also inflating, I think that will be the story for the next few years,
Inflation, not deflation. Japan is leading the charge
Gordon Brown was one of the longest serving Chancellors of the Exchequer, so he probably is someone to listen to. If memory serves me, he introduced QE very early on, presumably seeing what was going on in the US. The result (imo) is over-inflated asset prices, with London being the most outrageously expensive place to live. But then being the home of the derivatives market, there’s plenty who can afford eye-popping real estate prices.
There’s going to be another economic crisis because there always is. Everyone is looking around to see where it hasn’t happened yet, and the general focus is directed eastwards. There’s plenty of evidence of a serious real estate bubble in China but accounting standards don’t allow for transparency, so it’s not known how bad things are. Whatever, it may be a good thing if we have another crash (or two), and sooner rather than later. Mr Brown will be hoping so too. His increased consultation fee will help pay off that large mortgage he likely has.
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