Could the world be heading for another financial crisis? | Counting the Cost


Because the world grapples with the coronavirus pandemic, unresolved outdated wounds could set off one other monetary meltdown.

As rich nations spend trillions attempting to maintain companies afloat, they’re counting on banks to keep up the stream of money to industries and providing mortgage compensation holidays to shoppers.

In Europe, the place banks have but to get well from the 2008 North Atlantic Monetary Disaster, there are fears that unhealthy loans will topple some banks and monetary establishments.

In america, President Donald Trump’s administration has been rolling again safeguards to forestall one other monetary disaster, stress-free guidelines on how a lot cash banks ought to have available to cowl losses, weakening stress assessments and permitting extra proprietary commerce.

Bear in mind when banks would wager in opposition to their very own shoppers? For greater than a decade, banks stopped utilizing their very own cash to wager on markets however they’ve lent cash to hedge funds to just do that.

Bloomberg calculated that Trump’s tax cuts saved the US’s high six banks $32bn – on the identical time these banks minimize jobs, slashed borrowing and ramped up funds to shareholders. The 2008 monetary disaster has value US taxpayers an estimated $23 trillion or $70,000 {dollars} per American.

In Europe, regardless of politicians saying taxpayers would now not be on the hook for bailouts, they’re nonetheless occurring. In December, Germany’s $4bn rescue of Norddeutsche Landesbank-Girozentrale was authorised by the European Fee.

Emilios Avgouleas, the chair of worldwide banking regulation and finance on the College of Edinburgh, shared his ideas with Al Jazeera on whether or not the world could possibly be heading for one more monetary disaster.

What number of jobs might be misplaced to the pandemic?

Within the midst of a worldwide recession, the world is witnessing the quickest tempo of job destruction because the Nice Despair. Tens of hundreds of thousands of jobs could possibly be misplaced regardless of trillions of {dollars} being spent on saving companies and industries.

The toughest-hit sectors are the airline, resort and tourism industries.

Within the US, greater than 17 million individuals have filed for unemployment advantages within the final three weeks. Goldman Sachs says the economic system may contract by as a lot as 34 % and unemployment may rise to 15 %.

With unemployment already at a 45-year excessive, many employees in India’s casual economic system stand to lose their jobs as 1.three billion individuals stay in lockdown. It’s a related image in lots of low-income and creating nations.

Whereas in the UK the variety of individuals looking for common advantages soared to a staggering 950,000, there are related numbers in Spain and Italy. The Worldwide Labour Organisation (ILO) has estimated the pandemic will eradicate 6.7 % of working hours globally this quarter. That’s equal to 195 million full-time employees.

Sangheon Lee, director of the Employment Coverage Division on the ILO, discusses international job within the time of the coronavirus pandemic.

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