{"id":22775,"date":"2007-08-12T17:12:00","date_gmt":"2007-08-12T17:12:00","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=584"},"modified":"2007-08-12T17:12:00","modified_gmt":"2007-08-12T17:12:00","slug":"oportunidad-historica-o-colapso-economico-global-usted-elige","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/oportunidad-historica-o-colapso-economico-global-usted-elige\/","title":{"rendered":"Historic opportunity or global economic collapse. The choice is yours."},"content":{"rendered":"
\"\"<\/a>It has taken a period of stock market turmoil for some investors to realise that we are living through historic times for the global financial system. Put like that, it sounds apocalyptic, and indeed it may well be; but we are also facing an opportunity for financial authorities around the world to continue demonstrating their responsibility, competence and ability to view the global economic landscape from a global perspective.<\/div>\n
But before we delve into reflections that might at first glance seem exaggerated, let\u2019s briefly summarise what has happened and the situation we have reached, even though many people are still unaware of it.<\/p>\n
    \n
  1. The stock market volatility of recent days is nothing more than the visible manifestation of the underlying turbulence caused by the US mortgage crisis.<\/li>\n
  2. Mortgage abuse, falling house prices and rising interest rates have led to a high proportion (14%) of mortgages going into default in the US. It is worth noting that a similar scenario could easily apply to Spain and parts of the EU.<\/li>\n
  3. This default has led to a fall in the value of funds and assets based on this type of debt, as many of these non-performing loans had subtitled<\/a> and recklessly leveraged. A Bear Stearns<\/a> two of his funds were written off: High-Grade Structured Credit Strategies Enhanced Leverage Fund <\/span>y High-Grade Structured Credit Strategies Fund<\/span> (the latter having some residual value given its lower leverage). Other major banks such as BNP are also facing their own problems.<\/li>\n
  4. The public outcry<\/span> This also makes investors reluctant to buy corporate debt. This jeopardises corporate transactions that have nothing to do with an American failing to pay their mortgage, but it hinders global business growth whilst increasing risk aversion among investors.<\/li>\n
  5. These problems are amplify<\/span> due to various factors, including: a) Securitisation or securitisation<\/a> of these mortgage debts of doubtful recoverability by packaging them as assets attached to more secure mortgage debts. This apparently dilutes the risk to make them more marketable, but in reality it is creating a route of transmission<\/span> from the crisis to products that should not be affected by defaults. b) The leverage that financial institutions generate in order to capitalise more fully on the substantial returns from these products. The debt incurred through these funds will become another route of transmission<\/span> for the rest of the economy.<\/li>\n
  6. The timing of the contagion<\/span> It is unfolding gradually: the securitisation of subprime mortgages, corporate debt, a reluctance to engage in frivolous interbank lending, and nervousness in the equity markets, although the latter is of little consequence given the gravity of the underlying problem.<\/li>\n
  7. A coordinated, sustained and long-standing effort by the world\u2019s major central banks to prevent dry<\/span> <\/span>the cash flow of the system.<\/li>\n
  8. Outlook: Unpredictable, although we do not believe the situation will be catastrophic for a number of reasons, which we will explain below.<\/li>\n<\/ol>\n

    People today tend to react to problems in a narrow-minded way, whether for the sake of the nation, a corporation, a race, a religion, and so on\u2026 But when faced with exceptional problems, humanity must\u2014we must\u2014be capable of responding on a global scale. Why? Quite simply, because the stakes are too high: the financial system \u2013 in other words, everything. One example of which we should be proud is the intervention widespread, concerted and <\/span>proactive<\/span> by central banks to breathe new life into our economic system. The EU, the US, Japan, Australia, Canada, Switzerland and Norway have already done far more than just make a symbolic gesture for the financial well-being of us all. South Korea and Indonesia, amongst others, have also committed themselves, and this is only the beginning. I am fully convinced that the response, based on solidarity, will be historic, even from China and some Islamic countries. We are all in the same boat. If our economic system fails, it fails all<\/span> our mode<\/span> <\/span>Vivendi<\/span>, and our planet would be set back by many generations. Such global solidarity can only arise in the face of catastrophes that we have only ever seen in science-fiction films, or in situations such as the current one, where the stakes are even higher than climate change or a bird flu pandemic.<\/p>\n

    \"\"<\/a>
    For all these reasons, it seems logical to me to think that this event, which brings us closer than ever to the 1929 crash, will serve to strengthen our financial system and make it more resilient in the future. I believe, and I want to believe, that the measures we will see taken by all<\/span> The world\u2019s economic authorities over the coming months will feature in future economics textbooks. We are probably laying the theoretical foundations for the protocols global<\/span> which must be implemented by all countries worldwide in the event of future crises and major financial instability.<\/p>\n

    Having said all that, I want to make it absolutely clear that my personal view is an optimistic and positive one. And that the success or failure of our financial system depends largely on our collective willingness to keep a cool head and our investments active. As I say in the title of this post, if we can turn this scenario into a historic opportunity<\/span> instead of a hysterical breakdown<\/span>, we\u2019ll come out on top, with the system even stronger than before. But if that doesn\u2019t happen, we\u2019ll all end up doing ourselves a great deal of harm.<\/p>\n

    Faced with this scenario\u2014whether one of normality or collapse, which we ourselves will bring about\u2014the question we must ask ourselves is: Where are we going to put our money if we no longer lend it through the financial system to keep things running smoothly? Do we really think that creating a macro-corralito<\/span> Will a global approach spare us any harm in terms of the risk of continuing to rely on the system? Common sense will save us, whereas panic would be the greatest act of self-destruction in history.<\/p>\n

    Tomorrow, Monday, we will see how the world reacts to this unprecedented situation. Nervousness and volatility are guaranteed, but above all, we must have confidence in ourselves. We may see sharp corrections in the credit spread<\/a>, stock market volatility with \u2018Black Fridays\u2019, \u2018Black Mondays\u2019 and \u2018Black Days\u2019 on any day of the week, sharp adjustments and corrections in macroeconomic figures, etc. We might even, why not, see a certain normality<\/span> from now on and tiptoe past all the dangers mentioned as if it had all been nothing more than a nightmare. In any case, it will be a positive step. The one option we cannot afford is a global economic collapse<\/span>. As far as we are concerned, it is very clear what we are going to do and what advice we will give our clients: we will continue to have faith in the system and try to make the most of the opportunities that arise in any crisis. What else can we do that won\u2019t lead to our own downfall?<\/p>\n

    Keep a close eye on developments over the coming days and weeks. Are we as clever as we think we are?<\/div>","protected":false},"excerpt":{"rendered":"

    Ha sido necesario un escenario de bolsas agitadas para que algunos inversores tomen cierta consciencia de que estamos viviendo tiempos hist\u00f3ricos para el Sistema Financiero Global de nuestro planeta. Dicho as\u00ed parece apocal\u00edptico, y de hecho puede serlo; pero tambi\u00e9n estamos ante una oportunidad de que las autoridades financieras de todo el mundo sigan demostrando […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-22775","post","type-post","status-publish","format-standard","hentry","category-sin-categorizar"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=22775"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22775\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=22775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=22775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=22775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}