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Next Financial Crisis

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The Next Financial Crisis According to the Economic Times, a second Asian Financial Crisis is on its way. The two giants of Asia almost seem to be competing with one another to become the cause of the next global financial crisis. Between China and Japan, Japan will most likely trigger the crisis. Japan is inflating its money supply three times faster than the Fed’s QE program. It is weakening the yen as intended and exporting deflation to its customers, making them less competitive. According to Arabian Money, the sugar-rush effect is reflected in a booming Japanese stock market as profits from abroad will also now be higher in yen. However, devaluation in a highly indebted economy is loaded with danger. Japan has suffered from two decades of stagnation. It has the highest debt-to-GDP ratio of any major country, and a demographic crisis so acute that more adult diapers than baby diapers are sold. The government has appointed a new head of the central bank whose stated goal is to inflate the economy as a way of trying to encourage growth (Washington Times). For many reasons, it is doubtful that the new strategy will work. One can easily envision a scenario where the necessary rise in interest rates gets outside the control of the central bank. The Japanese trade deficit could widen further through March 2014 due to demand picking up ahead of the sales-tax increase. Financial crises come round every seven years on average. There was the stock market crash of 1987, the emerging market meltdown in the mid-1990s, the popping of the dotcom bubble in 2001 and the collapse of Lehman Brothers in 2008. If history is any guide, the next crisis should be coming along some time soon according to experts. To be exact, according to some creative analysts at the management consulting firm Oliver Wyman, that date is April 26, 2015. The next two years (2014 and 2015) are going to…...

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