M Humayun Kabir: Experts at investment bank JPMorgan hinted that the next global financial crisis will begin in 2020.
The recession in two years’ time will be less damaging than the 2008 crash, Analysts say, reports The Independent Online.
It is predicted that US shares could drop by 20 per cent, well below the 54 per cent tumble in the S&P 500 index a decade ago.
Bigger falls would be seen in energy prices, the value of base metals and shares in emerging markets, such as Brazil, Russia, India and China.
According to a Bloomberg report of the analysis, JPMorgan strategists John Normand and Federico Manicardi described this scenario as “probably unalarming” relative to the average of past crises.
Another analyst at the bank, Marko Kolanovic, predicted that the next financial crisis could be sparked by “flash crashes” – sudden stock sell-offs by computerised trading systems.
“Basically, right now, you have large groups of investors who are purely mechanical,” Kolanovic said.
“They sell on certain signals and not necessarily on fundamental developments. Meaning if the market goes down two per cent, then they need to sell.”
This “great liquidity crisis”, as described by Kolanovic, would require central banks to take action to prevent a spiral into a depression.
“The next crisis is also likely to result in social tensions similar to those witnessed 50 years ago in 1968,” added Kolanovic.
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