Janet Yellen, the Chairman of the Federal Reserve Board, the successor to Ben Bernanke and Alan Greenspan, held a press conference on Tuesday of last week, during which she said that she believes that there will be no new financial crisis "in our lifetimes": "Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we're much safer and I hope that it will not be in our lifetimes and I don't believe it will be." Yellen said that the reason she believes that there won't be a financial crisis "in our lifetimes" is because the Fed is much more clever and vigilant now about detecting risks, having learned lessons from the last financial crisis: "I think the system is much safer and much sounder. We are doing a lot more to try to look for financial stability risks that may not be immediately apparent but to look in corners of the financial system that are not subject to regulation, outside those areas in order to try to detect threats to financial stability that may be emerging. After the financial crisis, those who see the damage in that type of thinking have played a major role in ensuring that we have a more appropriate system of supervision and regulation, hopefully for a good long time." CNBC
This is such a bizarre, naïve statement, that it's hard to know what to make of it. Yellen is expressing precisely the attitude that's always been prevalent prior to every financial crisis in world history. Politicians say "This time it's different," and "We've learned our lessons," and "It can't happen this time." And it doesn't happen this time, until it does.
Actually, the lessons from the last financial crisis haven't been learned at all. The Fed and central banks around the world have been "printing" hundreds of trillions of dollars, and governments around the world have been borrowing that money and going into new debt at an exponentially increasing rate. We've recently been reporting that it's too late for Illinois and Puerto Rico, which have gone into so much debt there's literally no hope of every paying it off.
This is true all around the world. According to a new report by the Institute of International Finance, global debt has reached $217 trillion in the first quarter of this year, and that's 327% of gross domestic product for the whole world.
China in particular poses an enormous risk. China's total debt surpassed 304% of GDP as of May 2017, according to the IIF.
Janet Yellen apparently believes that all this is no problem, that if a problem does arise, then the Fed or some other central bank can just print another trillion dollars in free money and use it to patch up the problem. So we have nothing to worry about....
Reuters and CNBC