Only six years after the end of the worst financial crisis since the 1930s some experts are worried another one may be on its way.
Some are "warning that the global community has failed to learn the lessons of the Greek debt crisis — or even of Argentina’s default in 2001, the consequences of which are still being contested furiously in courts on both sides of the Atlantic," writes The (U.K.) Guardian's Heather Stewart.
Some of the concern stems from the soaring dollar, plunging oil prices and the Federal Reserve's preparation to raise interest rates.
The dollar has reached multi-year highs against a range of currencies in recent weeks, oil prices have hit six-year lows, and many economists expect a Fed rate move in September.
"We’re going to have another financial crisis," Ann Pettifor, director of Policy Research in Macroeconomics, told The Guardian.
"Brazil’s already in great trouble with the strength of the dollar; I dread to think what’s happening in South Africa; then there’s Malaysia. We’re back to where we were, and that for me is really frightening."
Borrowing by developing countries soared 40 percent to $17.3 billion in 2013, according to World Bank data.
“Brazil’s economy is likely to be seriously tested as the greenback rises; Turkey, Malaysia and Chile have large dollar-denominated debts and sliding currencies; and a string of African countries face sharp rises in debt repayments. Ghana and Zambia have already had to turn to the IMF to ask for help,” The Guardian warns.
“Absolutely nothing has changed since the crisis,” Pettifor said.
Meanwhile, the combination of falling inflation and rising asset prices in the United States and elsewhere is creating a conundrum for central bankers, says Wall Street Journal columnist Alen Mattich.
U.S. consumer prices were unchanged in the 12 months through February, and the S&P 500 index stands less than 3 percent from its record peak.
"The balancing act required to manage the tricky scenario of falling inflation and rocketing asset prices has many a policymaker sounding nervous, and with good cause," Mattich writes.
For example, St. Louis Federal Reserve President James Bullard told the Financial Times
that the Fed risks igniting asset bubbles with "devastating consequences" if it doesn't raise interest rates soon.
But for the most part, it's "clear that central bankers will mostly play down bubble risks (they’ve seldom identified bubbles except with hindsight and not always then either) and keep their focus on the main real economy metrics: inflation and unemployment," Mattich says.
"Whether the outcome will be better than it was the last time round is another matter."
© 2024 Newsmax Finance. All rights reserved.