Predictions of a new round of turmoil in the banking system are causing concern in the financial world. Experts warn that the bankruptcy of Silicon Valley Bank and the bailout of Credit Suisse may be just the beginning of a long cycle of crises.
The excessive flow of liquidity and the addiction to easy money of the past decade are the main reason for this uncertainty. Central banks are also undertaking more conservative monetary policies, moving away from the use of zero or even negative interest rates. This can make a subtle but fundamental difference in how the financial system works and lead to significant changes in the way businesses invest and the way consumers buy homes. In conclusion, the uncertainty surrounding the economy is high and should be taken
Scientists and analysts warn that these disturbances in the banking system can have serious consequences for the global economy. As Rajan explains, while the central banks’ effort to stabilize the financial system has been laudable, the strategies used may have created new problems. In addition, the COVID-19 pandemic has already led to economic turmoil, and these new forecasts can make the situation even worse.
Turmoil in the banking system can lead to falling stocks and loss of assets for investors and businesses. In addition, they can make access to credit institutions more difficult and lead to higher interest rates and unemployment.