A historian who predicted the 2008 financial crisis of the year warned of a new threat

Niall Ferguson, a famous historian who predicted the 2008 financial crisis of the year, warned of a new threat to the economy, writes Observer.

Фото: Depositphotos

In June 2006, he warned that "over the next two years, monthly mortgage payments of $ 600 billion, withdrawn by borrowers in the so-called sub-standard market ... will increase by 50%."

It took 10 years after a massive crisis on Wall Street.

Nevertheless, Ferguson warns of another financial crisis, due to the stable growth of the economy and low unemployment.

“The post-crisis period is over. We may now be moving into a new pre-crisis period,” Ferguson said.

“I underestimated the ability of central banks, particularly the Federal Reserve, to resist what could potentially be a catastrophic chain reaction that they created by cutting interest rates to zero and then through quantitative easing. One of the direct consequences was that all types of financial assets recovered in value, and we did not go further into depression,” he said.

Now, as part of an exit plan for quantitative easing, the Federal Reserve has begun to tighten monetary policy, in particular by raising interest rates, starting in December 2015. Central banks in the UK, Germany and other countries are either thinking about such steps, or have already done so.

“It’s usually a sign that conditions are going to become less friendly,” Ferguson said.

The main difference, however, is that China is likely to become the epicenter of the storm.

“Sustained growth in China was another reason we didn't fall into the Great Depression. If China had not focused on building credit, I think things would have been much more difficult for the entire world. It was a stimulus package that worked,” the historian explained.

“With the emergence of some of the pathologies in China that we recognized 10 years ago, such as shadow banks, real estate bubbles, it is worth asking ourselves: Are China's big banks well capitalized enough to cope with a sudden downturn in the real estate market? So China is definitely a place to watch,” he said.

Overheated Chinese property markets and growing corporate debt are worrying economists around the world.

Since 2008, the share of corporate debt in total GDP has increased dramatically. Analysts Reuters estimate that two-thirds of borrowers are Chinese state-owned enterprises, many of which are unprofitable (and have no incentive to be profitable). This means that many of these companies will likely be unable to repay their debt. Analysts estimate that bad debt is 14 times larger than high-quality loans. Thus, if the percentage of non-refunds exceeds a certain level, this could provoke a similar crisis to 2008.

At the same time, some analysts believe that since the majority of Chinese lenders are state-owned banks, the government will gain more effective control over the economy in the event of an emergency.

Read also on ForumDaily:

Cargill: how the most secretive US billionaires live

How to get a credit card and build a good credit history

10 largest cities with the highest and lowest levels of salary satisfaction

What professions can quickly start earning over $ 100 thousands

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.