The financial system is in better shape than it was in 2008. But make no mistake: it faces a stern test. Our cover this week
each event is unique,” wrote Charles Kindleberger in his study of financial crises. But whereas “history is particular; economics is general”—it involves searching for patterns which indicate if a cycle is turning.
The mix of sky-high valuations and rising interest rates could easily result in large losses, as the rate used to discount future income rises. If big losses do materialise, the important question, for investors, for central bankers and for the world economy, is whether the financial system will safely absorb them or amplify them. The answer is not obvious, for that system has been transformed over the past 15 years by the twin forces of regulation and technological innovation.
Many of these changes have been for the better. They have made it cheaper and easier for all types of investors to deal in a broader range of assets. The crash of 2008-09 showed how dangerous it was to have banks that took deposits from the public exposed to catastrophic losses, which forced governments to bail them out. Today banks are less central to the financial system, better capitalised and hold fewer highly risky assets.
The second danger is that, although the new system is more decentralised, it still relies on transactions being channelled through a few nodes that could be overwhelmed by volatility.s, with $10trn of assets, rely on a few small market-making firms to ensure that the price of funds accurately tracks the under lying assets they own. Trillions of dollars of derivatives contracts are routed through five American clearing houses.
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Omicron symptoms: The lesser known signs in your shoulders and back - what to look forOMICRON - the now dominant coronavirus variant - has a number of signs. These can occur differently in people, and may vary in severity between those who are unvaccinated and vaccinated. Indeed, the UK government says the latest data shows a booster is needed 'to protect ourselves and the NHS against the variant'.
Read more »
Queen Elizabeth & Princess Margaret: A Look Back At The Royal SisterhoodFrom wartime photos at Windsor Castle to crown-filled galas, here are the photos that encompass the sisterhood of Elizabeth and Margaret.
Read more »
A Look at the Country of Azerbaijan at the Winter OlympicsThe nation of Azerbaijan straddles both Asia and Europe and is being represented by two figure skaters at the 2022 Beijing Winter Olympics.
Read more »
Love Island’s Laura Anderson transforms her look with new wispy fringeLove Island’s Laura Anderson is the latest celeb to transform her look with the help of a 90s-era fringe
Read more »
MPs laugh as Tory insists 'just look at our record' over cost-of-living crisis'When in government, the job of government is to make sure there isn't a need for foodbanks!' Labour MP JimfromOldham blasted Tories for 'sickening' foodbank photoshoots as the cost of living crisis worsens
Read more »