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hi and welcome to invest you less than a month ago the collapse of Silicon Valley Bank lay the first stone of a crisis that has been fueled these days by the purchase of Credit Suisse by UBS and the fierce surrounding a possible collapse of Deutsche Bank a scenario to which central banks have responded by appealing for com Christine lagardi said that European banks are resilient with strong capital and liquidity positions so did the U.S federal reserve with the last Declarations of his president Jerome powwow however nurio rubini an economist known for accurately predicting the great financial crisis of 2008 doesn't share this position and warns of the weaknesses of the financial system and the risk it faces if the situation worsens he warns us that we are heading for an economic and financial crash with a hard Landing in the following minutes we will review these latest alarming statements made by this economist known on Wall Street as Dr Dooms and at the end of the video we will discover the date when he predicts that this great financial crisis will begin past weeks financial markets and World stock markets have been in turmoil due to the stress in the financial sector with Silicon Valley Bank credit Swiss UBS and Deutsche Bank in the Limelight the President of the U.S federal reserve and the president of the European Central Bank after announcing interest rate hikes of 0.25 and 0.5 percent respectively tried to come Market nervousness with their statements Jerome Powell said that the financial system was solid and had good liquidity all depositors Savings in the banking system were safe according to experts in the coming months we will see the Federal Reserve begin to ease monetary policies with interest rate cuts that will continue over the next two years this may have a good effect on the stock market but as we will see further on the damage to the economy may be already irreparable don't forget that the best way to support this video is by hitting the like button and subscribing to our Channel however nuriel rubini does not share this optimistic stance at all in a recent interview this week in MarketWatch with the title most U.S banks are technically near insolvency and hundreds are already fully insolvent The Economist asserted that his view is very different from the positive view of central banks Dr Dooms believes that the clear reality is that we are heading for an economic and financial crash with a hard Landing of the economy after aggressive rate hikes specifically argues that it is not possible to achieve price stability maintain economic growth and have Financial stability at the same time because the financial system is unable to cope with the public and private debt currently accumulated which today exceeds 30 trillion dollars he calls the current situation A trilemma before continuing with rubini's statements we would like to know your opinion about the current situation write in the comments if you think that central banks are acting correctly with the interest rate hikes and as they believe there will be no crisis or if on the contrary you think like the protagonist of today's video and believe that we are approaching a total crisis for the man who predicted the 2008 Global financial crisis the main problem for the world economy does not lie in the unrealized losses burned by the U.S financial system by the end of 2022 U.S banks and realized losses on Securities had reached 620 billion dollars about 28 percent of their total Capital 2.2 trillion dollars the problem is that for some of the regional Banks this figure is much higher it is not just that the Securities are undervalued the problem lies in the Investments that the banks made with their excess liquidity two years ago Rising interest rates have caused the value of these Investments mainly fixed income to fall considerably the assets of these banks have declined find so much due to Rising interest rates that many are literally insolvent taking this into account unrealized losses would amount to as much as 1.75 trillion dollars or eighty percent of their Capital the unrealized nature of these losses is nothing more than an artifact of the current regulatory regime allowed since the 2000-day crisis which allows Banks to Value Securities and Loans at face value rather than at their true market value however the problem arises when depositors flock to withdraw their savings and the bank must sell these Investments with loses to meet the need for cash and this is where rubini says if depositors flee the deposit franchise evaporates an unrealized losses on investments become reality bankruptcy then becomes inevitable before giving his prediction about the beginning of the crisis Dr Dooms points out that the approach of Christine lagardi who argues that sound and well-managed Banks could overcome a supposed credit crisis if their liquidity was backed by the monetary authorities The Economist as this incorrect the point at which interest rate policy can be used for Price stability and at the same time use liquidity to support the financial system and have Financial stability only occurs when the problems in the financial system are purely liquidity related and limited to individual institutions it would only work in localized stresses and not in systemic stresses as is the case here when you have a systemic problem and there is a risk of insolvency it is inconsistent to try to achieve price stability and financial stability we are heading for a hard Landing a credit Crunch and significant amounts of losses for debtors facing much higher nominal and real rates but also for Savers and creditors because Rising interest rates reduce the market value of their creditor assets so so we have Financial instability price instability and economic instability the respected Economist believes the banking crisis is far from over and the Central Bank Authorities are merely buying themselves sometime by insisting the banking system is sound Dr dims goes on to say that the main dominoes to fall will be the regional Banks the smallest banks in the economy the main customers of these entities are small business owners and households thus the trilemma for central banks presents itself as interest rate hikes which aim to achieve price stability can trigger recession directly affecting most of the population and thus creating High run employment while increasing the risk of severe Financial instability the situation that rubini raises could directly affect people like you or me The Economist in his Twitter account recently talked about the low level of savings of American families and the immediate risk they were facing by not being able to meet Tran and food payments r rubini is clear that we will enter into a serious economic recession in the second half of the year and says that this crisis will be deeper than expected in his opinion it has brought together the worst of the 1970s in terms of negative Supply shock reduced growth and inflation and debt ratios much higher than after the great financial crisis of 2008.
this combination of factors puts global economic stability at risk and should according to the expert serve as a huge warning to us to be very cautious with our finances the investor warns central banks that they cannot take for granted that the looming credit crunch will eliminate inflation by restraining aggregate demand he says this is because negative aggregate supply shocks are still present and labor markets remain too tight while a severe recession may help curb price and wage inflation it will ultimately aggravate the debt crisis which in turn will fuel an even deeper economic recession the because of this systemic Doom Loop liquidity support is insufficient to prevent it therefore it is important for everyone to prepare for this crisis we hope you like the video leave me your opinion on the current situation in the comments of this video and share it if you see it appropriate with all those people you think may be interested don't forget to hit the like button and subscribe to the channel and turn on all notifications see you in next videos greetings and good Investments
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