The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned.Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield.“Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” he told The Telegraph.Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20 percentage points to 275pc of GDP since then.
Should we be surprised that it is looking like 2007 again?
As sub-investment grade syndicated loans surge to 40 percent of all loans we see that very little was learned from the financial crisis.
Those who helped create the crisis are, for the most part, still in charge.
Banks, whose wild risk taking fueled the problem, continue to make the same caliber of decisions.
Now is the time to hedge against the banking system with gold.
While we can't be certain when the next crisis will strike, we can be assured it will likely be worse than the first one, and this time, bank accounts will be vulnerable to "bail-ins".