Could there be an impending financial crisis after vote Brexit and Trump’s administration?
Today, I vote yes.
Corporate banks are bigger than ever with the top 10 banks of the top 100 owning more than 50% of the assets among them and Donald Trump is causing chaos again as he attacks the Police network’s independence, which during Nixon’s administration caused rampant stagflation, as well as tearing up the International system.
Since the last financial crisis in 2008 and the subsequent collapse of Lehman Brothers, the fourth-largest corporate bank in the US, the American economy crashed, and with it the globe, due to numerous State’s dependency on the dollar. The Great Recession hit us all and some of which have yet to recover fully.
Today the UK economy, the 5th most powerful economy in the world, faces economic decline. An outcome many predicted and more warned British politicians would happen due to the Brexit vote and the current direction in federal policy in the US, it even may be likely.
J.P Morgan has grown 100 per cent in the past 10 years and Bank of America’s assets have increased by more than 50 per cent, these deregulatory gains have not gone unnoticed on the global stage when growth has occurred for those with the wealth to overcome financial oppression. Is America set to do it again, so soon after the last economic crash and among international turmoil?
In truth, the banks are more resilient than ever because we have yet to fully recover from the financial crisis as a global population, meaning banks are becoming more stringent in the risk of another economic collapse, seen through lower interest rates, although the UK base rate has now increased to 0.75%, the highest it has been since 2009, but took a dip to 0.25% when the Brexit result was announced. Leaving the European Union in March 2019 could plummet the UK’s base rate yet again, making investments in UK banks, next to worthless and encouraging the everyday consumer to spend instead of saving.
However, in the US, banks have been incentivised to raise more capital by the federal government also giving them capital, with the implementation of ‘bank stress tests’ have allowed them to monitor and manage their liquidity and exposure to risk. How much risk can the largest banks take in the worst-case scenario? They could fall harder than before due to their unrestricted growth, ultimately causing a worse financial depression than before, worse than the 1930’s economic crash because Trump is taking away the ‘safety net’ and its regulators leading to what one economics professor termed ‘a perfect storm’.
What is Stagflation?
Stagflation is continuous high inflation, coupled with high unemployment a stagnant or declining demand in a country’s economy. This could happen due to Congress recently repealing portions of the Dodd-Frank Act of 2010, which was enacted to prevent another financial meltdown. Smaller and midsize banks would now be exempt from the more stringent oversight and stress tests designed to access the ability of these banks to withstand another crisis.
The last year-to-year CPI figures tally overall inflation to near 3 per cent, the highest in six years. To conquer this, some argue there needs to be an “independent Federal Reserve at the core of a sound monetary policy with its goal… maintaining price stability… If the Fed complies with the undue pressure to keep interest rates low, as it did during the Nixon administration, the days of stagflation will return with a vengeance.”
What would that look like for you? Your own personal financial crisis.