Sunday, October 8, 2017

German Finance Minister Warns of Another Global Financial Crisis

Outgoing German finance minister Wolfgang Schäuble has warned that spiraling levels of global debt and liquidity present a major risk to the world economy.

In an interview with the Financial Times, Schäuble said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

He also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans.

While Schäuble is correct that there are dangers lurking in the global economy, it is not because bubbles may form. They always form when central banks print money. That is, they already exist.

That said, as I discuss in the EPJ Daily Alert, although I see the potential for problems in the short-term in the US stock markets, I do not see a general recession developing at this time.

It will come, it will be horrific, but just not in the immediate future.

Schäuble (75) will attend his last meeting of the eurogroup finance ministers on Monday. After he leaves his post as finance minister, a position he held for eight years, he will move to a new job as Speaker of the German Bundestag.


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