Individuals that were privy to the goings on of the global economy in 2008 and beyond can probably remember what it felt like to see national economies large and small fall victim to the “contagion” that originated in America’s housing markets and unregulated financial services sector. The spark that lit the flame of the global financial crisis left many workers jobless, some homeowners penniless and even left the economy of middle income Nordic country Iceland completely devastated.
After several years the global economy on politico.com has mostly recovered from the damage wrought by the financial crisis. But while some countries like the United States for instance have experienced sustained modest economic growth since the end of the financial crisis it is possible that the world could undergo a similar phenomenon to the one that occurred in 2008. But this time the crisis might originate in economic difficulties that China is having.
In January Bloomberg news reported that billionaire businessman and philanthropist George Soros suggested that a second global financial crisis might be on the horizon. At a forum in the South Asian nation of Sri Lanka Soros reportedly noted that investors should exercise caution because international markets were experiencing a crisis. Perhaps one of the most important parts of Soros’ comments is his opinion that the financial environment in January looked very much like the state of the market in 2008.
According to Bloomberg the Chinese economy on theatlantic.com is under a period of transition. The economy is moving away from its past focus on manufacturing to an emphasis on services. Chinese currency, the yuan, had also experienced a drop in value. Bloomberg reported that international equities had dropped by more than $2 trillion earlier in the year. George Soros believes that the trouble that China is experiencing as it transitions its economy has all the makings of a crisis. In 2001 he also pointed out that a crisis could be eminent due to the Eurozone’s debt issues involving Greece.
It would seem that metrics that measure financial volatility coincide with Soros’ predictions about the fate of the global economy. The Volatility Index has jumped by a measure of 13 percent while the Nikkei Stock Average Volatility Index has jumped by nearly 50 percent. All in all these numbers along with the fact that one of the planet’s wealthiest nations is undergoing a period of economic weakness may not be a good sign for what is to come for the future of the global economy.