Thursday, September 13, 2018

JP Morgan becomes newest investment bank to forecast next financial crash

Back in July, Bank of America's bear market indicators began to light up as the Fed signaled that they were fully entrenched in a higher interest rate, lower balance sheet policy.  And now on Sept. 13 we can JP Morgan to the mix of major banks to put either a bear market, or financial crash, on the radar.

With the 10th anniversary approaching of the catalyst for the last major global stock market crash – the Lehman Brothers’ collapse – strategists from JPMorgan are predicting the next financial crisis to strike in 2020. 
Wall Street’s largest investment bank analyzed the causes of the crash and measures taken by governments and central banks across the world to stop the crisis in 2008, and found that the economy remains propped up by those extraordinary steps. 
According to the bank’s analysis, the next crisis will probably be less painful, however, diminished financial market liquidity since the 2008 implosion is a “wildcard” that’s tough to game out. – Russia Today
From their assessment, JP Morgan correctly cites one of the most important reasons that will lead to the next financial crash, but they also fail in noting the myriad of other root causes and underlying factors.

Credit expansion during the Great Depression lead to a crash in 1936-37 when both the government and central banks started tightening cheap money.  However what this proves today is that the Fed, ECB, BoE, and Bank of Japan's actions after 2008 to save the financial system and bring about economic recovery are a repeat of history as they have only delayed the inevitable for what is coming once these same central banks are forced to stop propping up every single market.

An economy does not grow naturally by using credit to reinflate a deflated market system, since the one true requirement to achieve this is the elimination of bad assets, and the deconstruction of insolvent entities.  And whether it was JP Morgan taking on the liabilities of Bear Stearns, the U.S. government bailing out AIG and Goldman Sachs, or Germany doing everything in its power to prop up Deutsche Bank, the fact of the matter is that debt accumulation always demands a reckoning, and it is long past the time when that bill has come due.


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