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British consulting firm Oliver Wyman has a vision of the next financial crisis.The 24-page report begins with a dramatic account: John picked up the phone. It was the bank’s legal counsel, Peter Thompson, calling. He had dramatic news. Garland Brothers, one of the world’s oldest banks, would declare bankruptcy tomorrow….
If that sounds familiar, so will the way the crisis plays out. Loose monetary policy and faulty regulation drives money into shadow banking, commodities and emerging markets. When the bubble pops, no one escapes the crash that follows.
Shadow bank liabilities soared before the last crisis. They've declined as banks are forced to clear toxic assets. But guess what happens next
Investors desperate for yield are forced into the unregulated shadow banking sector, trying new innovations and increasing risk
Ben Bernanke and other factors create a bubble in China, the world's largest commodity importer, leading to a bubble in commodities
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