On Aug. 17, 1998, the Russian government announced a
default on short-term obligations and a currency devaluation. The financial
system was practically destroyed. Ten years later, in 2008, there was another
crisis, this time a global one, that hit all the world’s economies, including
Russia’s.
There were both similarities and differences between the two crises — each resulted from internal and external shocks. But we haven’t learned our lessons from them, and there are reasons to be worried that a new economic catastrophe is on the horizon.
Although it’s been five years since the last global crisis, it wouldn’t be accurate to say that the world economy is truly healthy. An exterior shock similar to the one that caused the economic collapses in 2008 and 1998 is still possible. In 2008, the epicenter of the crisis was the United States, but today the biggest threat comes from China — and from the fact that the entire developed world still balances on the edge of recession. If, in addition to that, there is a major shock from China, such as a slowdown in growth to just 3%, the world will be faced with another economic meltdown. A slowdown in demand for metals, for example, is already a menacing hint that this could happen.
There were both similarities and differences between the two crises — each resulted from internal and external shocks. But we haven’t learned our lessons from them, and there are reasons to be worried that a new economic catastrophe is on the horizon.
Although it’s been five years since the last global crisis, it wouldn’t be accurate to say that the world economy is truly healthy. An exterior shock similar to the one that caused the economic collapses in 2008 and 1998 is still possible. In 2008, the epicenter of the crisis was the United States, but today the biggest threat comes from China — and from the fact that the entire developed world still balances on the edge of recession. If, in addition to that, there is a major shock from China, such as a slowdown in growth to just 3%, the world will be faced with another economic meltdown. A slowdown in demand for metals, for example, is already a menacing hint that this could happen.
Ominous signs…..To Read More…..
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