“I don’t see how we could escape a new financial crisis”: interview with Gaël Giraud on the 2020s


Why does this financial crisis seem inevitable to you?

Without giving in to determinism, what can be said is that there is a structural problem linked to the zero or negative interest rates of the rich countries. I fear that they will stay close to zero for a long time due to deflation. As a result, investors will continue to take irresponsible risks in the financial markets: the lower the interest rates, the more investors are encouraged to risk everything to make their investments profitable. The lack of yield on bond securities then becomes a permanent incentive to fault. Coupled with the enormity of private (and not public) debts in the world, this makes an ideal cocktail for a new crisis.

Where would this crisis begin?

There are many possible homes. First, there is the debt of American students, which exceeds $ 1.5 trillion. American students entering the workforce can only pay off their debt if they have high wages early in their careers. And it is only possible if the US economy really resolves the unemployment hidden behind the underpaid odd jobs, if inflation goes up again accompanied by strong growth (which would be a catastrophe for the climate). However, there is a real risk that the US labor market will run out of steam, which could end up in a situation similar to that of 2007.

A second possible home would be… a new crisis in subprime. Many American credit institutions have started doing the same thing again before 2007. They lend again to poor American households, before securitizing these bad loans and disseminating them on the international markets. As if we had learned nothing from the 2008 rout! Another possible source in the United States: credit card debt: approximately $ 1,000 billion. These mountains of debt are linked together and create an economy where debt plays the role of a hard drug. How long will the American drug addict manage to get the cam without which he can no longer live?

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The third focus could be European: a large bank on the continent would go bankrupt, for example. European banks have a lot of Non-performing loans, or “rotten” assets to speak French: several hundred thousand euros. Italian banks, in particular, but they are not the only ones: cajas Spanish women are still in bad shape; the Landesbanken Germans are not doing well (and Germany has done everything to prevent the European Central Bank from going to closely supervise this sector); Deutsche Bank regularly gives worrying signs of fragility. We are far from immune to the bankruptcy of a large European banking establishment. Contrary to what they repeat, the banks have not finished cleaning their balance sheets after the 2008 crisis. By the time of Christine Lagarde, the IMF had already multiplied the warnings on this subject.

Fourth focus: China. Chinese banks are completely opaque state-owned banks, much of which is unknown. They have lent heavily to fuel the housing explosion on the east coast of China. However, errors in estimating migratory flows linked to the Chinese rural exodus which affects more than one hundred million people over a decade – have led to thousands of ghost districts, which are empty today. This housing bubble could burst anytime soon, much like in Japan in the late 1980s.

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