John Ficenec, editor of the Telegraph's Questor column joined the Right Hook this evening to discuss the possibility of a second credit crisis - he thinks that it is the inevitable consequence of how we dealt with the last one.
Mr Ficenec warned that little was learned from the last economic crisis:
“The main problem was cheap debt too much of it and absolutely no risk," he told George Hook.
“The problem that we’ve seen since 2009 is just the creation of even more debt, even lower interest rates and another bailout around the corner for anyone that goes wrong. It does seem as though the next one will be inevitable until those underlying causes are addressed.”
"I dont think the amount of money being printed across the world is actually doing anything. We're still suffering form the same problems of unemployment and underneath the economy simply is not recovering," he added.
Listen to the full interview here
Ficenec argues that a deflating property bubble in China could be the occurrence that triggers a new crisis.
"The really interesting thing for me is China. The Chinese property bubble has been one of the biggest tin the world and Chinese property companies rely on a huge amount of borrowing from UK banks to fund themselves. And now we're seeing a lot of Chinese companies defaulting on their loans."
Telegraph
This is being treated as a liquidity problem by the Chinese government - but Mr Ficenec argues that the problem is deeper than that.
Global financial institutions like Standard Chartered and HSBC have rapidly increased their lending operations in Asia since the onset of the original 'sub-prime' crisis.
He warns that the interconnected nature of the world economy means that contagion is almost inevitable.
“It may be easy to say, 'well that's the Chinese, that's their problem'. But the thing is it’s the same balance sheet ultimately that lends money to China that lends money to Ireland that lends money to companies in the UK, so when debts default and go bad it can have ramifications for the rest of the world."
Telegraph
George Hook told Ficenec he was now "terrified" at the prospect of a global credit crash, although Ficenec tried to calm his fears, saying:“It has all the hallmarks of exactly what we saw last time, which is worrying, but I don’t think there's need for fear at the moment. At the moment we have a huge amount of money being printed by the ECB so it may be able to continue for a while before it falls over."
