China falls - but the real danger of the US

Recent falls in the Chinese stock markets kept on their toes the entire planet. However, on the horizon looms a much more dangerous collapse, compared to which volatility in China seem sheer trifle. In America, imperceptibly inflated new credit bubble.

German magazine Focus warns that soon the planet can “start” from the events on the other side of the Pacific. On the danger that comes from overseas, he writes in detail both the German edition - Welt. In recent years, investors have invested in US securities hundreds of billions of dollars. And, increasingly, they do so on credit, which is especially dangerous for the “health” of the financial markets. With stable prices bubble can go unnoticed and eventually even disappear without a trace, but in the case of sharp fluctuations in prices of major corporate bankruptcies or any other financial cataclysms it will inevitably burst.

The credit bubble has swollen to gigantic proportions. Over the past 6 years, from February 2009, the volume of lending of securities, according to Welt, has tripled to 173 billion. Dollars to more than 500. The bubbles of recent years, in 2000 and 7 years, were significantly smaller in size, the not less than the consequences of their popping still fresh in the memory of the financial world.

Creating favorable conditions for speculation and lending securities promotes policies of the Federal Reserve, which for six years to keep key lending rate at a very low level. The rate in the region of 0 makes the game very profitable to increase the value of shares and speculation.

Another indicator of the growing bubble is a high ratio of outstanding loans to the US GDP. Now, this parameter rose to a record 2.9%. The last two decades, it fluctuated between 1 and 2% and only twice at the end of 1999 and summer 2007, was raised to 2.5%. Both times, this increase was accompanied by a collapse in the stock markets of America and the tsunami waves, which dispersed in all directions throughout the world.

This will happen now and, if there is, then when? This question, of course, is not only interested in American economists, given that we are talking about the first economy in the world. While stock prices remained stable and the US equity markets is silence and tranquility, but for the credit explosion bomb small enough sparks. The consequences of this explosion will be even and unpredictable, but very large.

4 August 2015

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