Deutsche - the Next Crisis because "build-up of debt without parallel"

In this 94 page 18th September report, Deutsche Bank conclude a new crisis is a certainty - only question is when and its form. "The authors hold that the move to currencies backed by governmental fiat rather than the supply of gold being extracted from the ground has enabled a build-up of debt without parallel."

If the 94 pages of the report, put you off, there are a range of articles in the media. The Financial Times article here is worth a read. https://www.ft.com/content/52c33d8a-9f71-11e7-9a86-4d5a475ba4c5 This same article was reprinted in the AFR yesterday. See article here: http://puzzlefinancialadvice.com.au/2017/AFR/170925_AFR_Time_spent_thinking_about_the_next_financial_crisis_is_not_wasted_Deutsche.pdf

Here is a few key excerpts:

"Meanwhile, the authors hold that the move to currencies backed by governmental fiat rather than the supply of gold being extracted from the ground has enabled a build-up of debt without parallel. Their global estimate for the total amount of stimulus in the decade since the crisis, which combines extra money printed plus widening of government budget deficits, is $34tn. Leaving the straitjacket of the gold standard (and they do not advocate a return), has at least given governments the option to deal with a crisis by injecting new money, and they have taken it.

In a system that has grown prone to crises, and with unprecedented debt, that is enjoying its longest lull in two decades, the chances of a future crisis are overwhelming. I cannot dispute this argument.

But perhaps the most alarming part of Deutsche’s study is the sheer range of possible triggers for the next crisis that they mention. It could be driven by; an economic recession (which would find governments out of bullets and asset prices exposed); a central bank unwind, as attempts to retreat from extreme stimulus (which the Federal Reserve will start in a very gentle way next month) push up rates and trigger a collapse; deflation, which would bring more monetary stimulus and more negative rates, and finally force a banking collapse; stretched asset prices, in which obviously overpriced equities and bonds would at last begin to collapse under their own implausibility; or a lack of financial market liquidity, as trading has steadily evaporated particularly in corporate bonds, allowing relatively minor sales to magnify into a catastrophic fall."

"Second, however, Deutsche have made clear that a crisis is coming, and therefore it is imperative to prepare for it. That might mean gold and precious metals — but they can be hard to trade in some circumstances and would do badly under deflation."

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