Minority Report: Analyst predicting a whopping banking crisis for 2015

[Elmore Furth]

Here is a reinflating-the-bubble cautionary tale.

In the caste system of the World Economic Forum's annual event at the Swiss ski resort, Mr. Wilkinson was at a bottom rung, denied access to most sessions and soirees. His message clashed with the optimistic tone of many of the elite business executives and political leaders at the meeting, who were eager to emphasize the progress made after two years of hand-wringing in the wake of the 2008 financial crisis.

Mr. Wilkinson's report “The Financial Crisis of 2015: An Avoidable History” isn't so sanguine.

The 24-page study describes how banks, unwilling to accept the lower returns on equity that result from higher capital requirements, may fuel a new bubble by chasing high returns in commodities or emerging markets. Regulators, by focusing their restraints on banks, may drive risk taking into unregulated funds that also pose danger to the system.

The report urges bank executives and shareholders to accept that the returns of the past are unsustainable and that they must do a better job of monitoring risks, especially in areas that produce unusually high profits.




Analyst predicting a whopping banking crisis for 2015
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[rhett o rick]

1. Urging the greedy to "back-off" is fruitless. nm

[bemildred]

2. It won't take that long.

Otherwise, this is spot on. The failure to punish and remove the bubble-makers will result in new bubbles, which will again pop.

[customerserviceguy]

3. There's one other reason, as well

We saw this happen thirty years ago. When lenders hold mortgages (or mortgage backed securities) that have low fixed rates, and rates rise dramatically, causing a squeeze between what it costs for funds, and what they get for them, there's another reason for a liquidity crisis. As rates rise, fixed-rate securities decline in value, even if not sold.

That's what happened with the S&L's, and led to the bailout of those institutions. Expect it to happen again.

[djean111]

4. I am already seeing this, I think....

I am, for no reason I can think of, getting emails from folks all excited about rising food costs all over the world, and how I can make a lot of money in food futures, because an influx of investment and money will encourage food-producing entities to cut costs and raise prices in order to keep profits rising.
It is pretty fucked-up when some people are thrilled that other people cannot afford food.
Same for health care, some are ecstatic because others cannot afford health care - that means the "free market" is working.