The next financial crisis, dot-com shock 4times 20trillion-dollar concern
11An analysis released in 2000evaluated the dot-com collapse in the year as a temporary shock worth 5times that amount, and said the next financial crisis could unfold at about 4times 20trillion dollars and is already under way. The analysis outlined the channels through which the crisis could spread and the vulnerable points.
11An analysis released in 2000viewed the dot-com collapse in the year as a shock worth 5trillion dollars. The same analysis warned that the next financial crisis could unfold at 4times 20trillion dollars.
The analysis said the next crisis is already under way. It said the crisis is not a shock to a single market, but can spread through multiple financial sectors.
The analysis said leverage within the financial system, liquidity vulnerabilities, and exposure among non-bank institutions are the key links in the spread of the crisis. It said clearing risks tied to derivatives could make the problem worse.
The analysis also pointed out that a simultaneous plunge in the bond market and exchange-traded products (ETFs) could amplify market shocks. It also said that the interdependence between banks and non-bank finance could make shock transmission faster.
The analysis said that the lag in policy response and the global interest rate environment could affect a deepening of the crisis. It issued a warning by presenting the scale of damage and channels of contagion with cases and figures.
The analysis materials show that if a crisis occurs, high volatility could appear across the financial markets. It also includes a call for monitoring by investors and supervisory authorities.
Sources: MarketWatch Top Stories
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