Finance Expert Sounds Alarm on 8 Ways a New Global Crisis Will Hit by 2015

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LAUSANNE, Switzerland, July 7, 2014 /PRN=KYODO JBN/ --

    Arturo Bris, Professor of Finance at IMD Business School and Director of

the World Competitiveness Center, predicts that a global economic crisis is

likely and that not enough action is being taken to avoid it. Based on

statistics, he said the world could expect a financial crisis as soon as April

2015, ending in March 2016. Bris said the cause of crisis will come from eight

possible scenarios:

    1. A stock market bubble

    In the last year, stock markets have performed unrealistically well and at

some point the situation will explode. In 2014 analysts were disappointed in

the first quarter because earnings were not in line with market expectations.

This means that if markets were to revert to a reasonable level with regards to

earnings, there will be a stock market drop of between 30-35%.

    2. Banking in China

    A severe crisis could be driven by growing Chinese shadow banking, a system

which consists of loans mainly to government institutions whose performance is

not well monitored and not open to competition. If this system collapses, it

will negatively affect the global economy.  

    3. Energy crisis

    The United States, as the world's largest producer of gas, could cause an

energy crisis. If the US begins exporting to the rest of the world, Russia

might feel threatened, causing a geopolitical storm. The US would have control

over energy prices and would exert influence over countries like the UK, India

and Japan.  

    4. Another real estate bubble

    There is risk of a property bubble forming in countries like Brazil, China,

Canada or Germany. Prices are going up because availability of credit is huge

and buyers are pushing prices up without realizing that they do not correspond

to fundamental values.

    5. Ratings and bankruptcy: 'BBB as the new AA'

    Companies currently have too much debt and the new norm is to have a BBB

rating. In the US there are only three companies left with an AAA rating:

ExxonMobil, Microsoft and Johnson & Johnson. If ratings are an indicator of

bankruptcy, there will be bankruptcies across the board. If interest rates

increased by 2%, half of the corporate sector would be wiped out.

    6. War and conflict

Almost everywhere, except in parts of Europe and the US, there is increasing

geopolitical tension. Events like the current crisis in the Crimea could

trigger a market crash, even if there is no war.

    7. Increasing poverty

    Overall world poverty has increased and whenever the poor become poorer we

can expect a social conflict. The crusade against income inequality could also

further hinder innovation and growth by reducing the benefits of innovation,

threatening the economy.

    8. Cash and hyperinflation

    The surplus of cash that central banks and corporations are holding could

end up damaging the economy. The ECB is lending money to financial institutions

that put it back into the ECB, which is a vicious circle and today Google could

afford to buy a majority stake in Ireland and Microsoft could buy more than 50%

of Singapore, which is immoral.

    "While many economies seem to be finally rebounding since the 2008 crisis,

we shouldn't be complacent," Bris said. "Too often we do not learn from history

and do not act when faced with a crisis we know is imminent."

    Arturo Bris is Professor of Finance at IMD and directs the IMD World

Competitiveness Center. He was a keynote speaker at IMD's Orchestrating Winning

Performance program where he unveiled his predictions for the future.

    Contact:

    Michael Savage;

    Editor and Media Relations Specialist

    Tel: +41-21-618-0453

    michael.savage@imd.org

    SOURCE: IMD International