Could Another Financial Crash Be on the Horizon? - Image

Could Another Financial Crash Be on the Horizon?

We are only into the second month of 2016 and already there are a few signs emerging that have got people worried another global financial crisis could be about to hit. While a lot of the Western world has been enjoying much improved economies with the talk of hope and promise from politicians and economists, some are worried that it may all come crashing down again this year.

The past few years since the global financial crisis of 2007/8 have felt like a prolonged period of recovery which we must surely soon be leaving behind. If there is another financial crash on the horizon a lot of that work could be undone. There are those who believe one could be on the way and others who think it is just scaremongering by overcautious academics.

The Evidence

A crash in oil prices is far from a positive sign for the global economy. It may make energy and fuel bills much more affordable for consumers but the complex relationship between the energy companies, revenue, borrowing and banks can quickly lead to problems. If oil prices collapse and the companies end up in trouble this puts a lot of strain on the banks.

Share prices and stocks have also been falling at the start of the year. The FTSE closed at its lowest level since August 2012 recently which has also been viewed as a sign that a new financial crisis could be on the cards. Turbulence in European and Asian markets could have a knock-on effect for America, leading to global troubles.

The Doubters

Not everyone is taking these signs as proof that another financial crisis is beginning to emerge though. It is still early days with plenty of time for the markets and oil prices to recover.

Certain experts have also claimed that the financial crisis of 2007/8 was caused by the collapse of an unprecedented bubble in the value of one major financial asset: residential mortgages. The current state of affairs are completely different and affect millions of investors, not just a few major players at the top. Instead, if the stock market predictions are correct (and they are not always) it could be another recession that is on the way.

The Potential Impact

If there is another economic crash about to happen so soon after the last one then the impact could be much worse. Employment levels would drop, national debt would rise and big time austerity would be back.

There will be worries for Greece and other nations that were teetering on bankruptcy before and the swing too far right political parties may return. Establishments like the EU and others could come under a lot of stress. There would be many questions hanging over global systems and the results could be much harder to deal with a second time round.

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