Will investors allow a banking collapse?
Now, one would have thought that after the banking crash of 2008, banks would have learned the bitter lessons of that time, never to be repeated. That was not the case.
Global banks today continue to take foolish risks, hiding questionable debt in fairy tale products, using secret accounts to cover up financial iniquity, and exploiting loopholes in the law meant to protect consumers from fraud and greed.
The fact is finance is a sector ''too big to fail.'' Banking and finance are essential to the bloodstream and health of the global economy. If banking fails, the global economy fails. If the global economy fails then our standard of living takes a hit with mass unemployment, and business and personal bankruptcy.
We are all dependent on banks directly and indirectly. The local, national, and global economies are driven by debt. This debt, owed to the wealthy and investors, is represented by mortgages, business loans, overdrafts, car and home loans, college loans and more.
Pundits expect the next financial crisis to be worse than the 2008 meltdown.
The world is $300 trillion in debt. In another unsustainable debt crisis, there may be no remedies. Lending will cease. If lending ceases the global economic engine will grind to a halt.
OK. The preceding narrative is simply a warning. The risk of COVID 19 stimulus spending becoming unsustainable with the world already facing a debt mountain is real.
Today, banks can still pay their debts, pass regulatory capital tests, and maintain a semblance of stability and credibility that is crucial for confidence in the global financial system.
However, with the onset of the pandemic, loan defaults are up and investors in finance are fearful.
Consumer demand has taken a hit during this pandemic and this has impacted businesses that depend on banking to keep their doors open, employees in work, and earning revenues and profits.
There is a symbiotic relationship between banks, and business and government: like a see-saw the one affects and impacts the other.
The one note of comfort is that owing to the 2008 crisis banks have increased their capital base to protect against uncertainty and recession, like we face today.
However, banks will not have sufficient capital to survive a serious economic implosion that will start with a mass debt default. Banks have not learned much from 2008 it would appear.
Laws designed to prevent banks from taking unsustainable and irresponsible risk have failed.
The pandemic has made matters worse with broken supply chains, mass unemployment, and thousands of businesses underwater or hitting the proverbial wall.
A banking collapse may have investors running for the hills. This will lead to depression, an indefinite recession and depression has dire global consequences that are impossible to predict.
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6 Responses to “Will investors allow a banking collapse?”
We don't live in a vacuum... whatever affects the wide world has catastrophic effects on our economy (the real one... not the black market / drug economy). So we would be wise keeping up on real world affairs as well as local politics... they play chess while we barely grasp how to play checkers.
We live in a manufactured world of debt, that we have been told from youth is "normal" but in truth most of us are living from paycheck to paycheck and accumulating debt as an army of consumers each and every day.
So don't criticise the brother... he is just trying to start an intelligent discussion. At least it makes more sense than all this idle advocating for independence without a contingency/development/sustainability plan.
They live to criticize Igwe but they don't have to tread his sh**? Worthless Morons