A Terrifying Vision Of The Financial Crisis Of 2015


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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.

Bloomberg said Barrie Wilkinson was the loneliest man at Davos when he presented this report. But it’s nothing that Roubini hasn’t said for months.

Loose monetary policy and faulty regulation creates a new bubble

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

Investors continue rushing into commodities

A China slowdown triggers a commodities crash

Commodity-fuelled markets in Latin American and elsewhere are crushed

Sovereign defaults soar -- but how high?

Best case: Another Iceland. Worst case: U.S. default.

Here's the outlook for losses under four hypothetical scenarios

Now for a longer, rosier outlook, check out...

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