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Is another crash on its way?

May 10, 2011

Anne Pettifor and her colleagues at the New Economics Foundation put forward a compelling case that there will be another financial-market crash in the near future. From another angle, Marketwatch agrees, quoting a Businessweek editorial:

After the popping of a real estate bubble led to the first global recession since the 1930s, world markets are frothing like shaken Champagne. Pundits claim to have spotted price increases that are unsupported by economic fundamentals in assets ranging from U.S. farmland to Israeli biotech to Australian housing to Chinese cemetery sites. Commodities have soared. Global junk-bond issuance hit a record in the first three months of the year … this is the granddaddy of them all, an almost-encompassing bubble right at the heart of monetary systems.

I tend to agree. Nothing much has been done to correct the problems that led to the crisis. Enormous sums of financial capital continue to slosh around the world, unchecked, whilst the banks remain unregulated. A series of new bubbles has inflated thanks to the continued deregulation of markets and the billiions being pumped into financial markets through quantitiative easing. The S&P 500 has had its best first quarter since 1998.

The timing of the crash, as ever, is difficult to predict. The author of the Marketwatch article previously put forward a forecast of Christmas 2011. Who knows? What we do know is that next time governments won’t have enough money for a bail-out.

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