My friend Tom Vartanian and I are very troubled by the condition of the U.S. and global economy in the wake of the recent pandemic and the incredibly loose fiscal and monetary policies over the past decade with even more on the drawing board. Feeling we needed to do something to help unleash a public debate about these dangerous policies, Tom and I co-wrote an article published today by the American Banker. I hope you will read the article and join the debate.
The next financial crisis is on its way.
Over the last two centuries, the United States has averaged a financial panic every twenty years, the second-highest incidence of economic disaster of any country on the planet.
Sure, many expect a post-COVID period of accelerated financial growth. Financial ups and downs are a natural part of any economy. But what we have been doing over the last half century is creating an endless continuum of booms and bigger and bigger busts that is increasingly difficult to break.
Financial crises are built brick by brick through a collision of government policies and private sector actions and reactions, often in periods where the velocity of innovation and pace of economic growth are the greatest. It all climaxes when a loss of public confidence converts the energy of economic euphoria into a race from risk. Nomura Bank’s Cassandra model recently warned that the U.S appears vulnerable to a financial crisis over the next twelve quarters.