"Archegos Incident Evokes Fears of Global Financial Crisis"

[Asia Economy Reporter Yujin Cho] 'Is the Archegos margin call incident a one-time event, or a sign hinting at a replay of the 2008 global financial crisis?

The margin call incident of Archegos Capital, which caused turmoil in the global financial market, has been diagnosed as a strong warning that the shock of the 2008 global financial crisis could return.

On the 5th, the South China Morning Post (SCMP) published an op-ed titled "The Archegos turmoil recalls the fear of the 2008 financial crisis."

Written by David Brown, CEO of NewView Economics, the article stated that the Archegos incident highlighted the need for financial authorities to take a closer look at the risks of bank lending and prime brokerage services (PBS), especially the potential threats of leveraged products.

He pointed out that while the Archegos incident may be a one-time event, it could be just the tip of the iceberg showing fatal risks amid rising global financial market uncertainty and a crisis atmosphere reaching its limit.

The global economy should have learned from the 2008 financial crisis that the global financial system could completely collapse and that stricter regulations and transparency were necessary, but it failed to gain any lessons about the risks of excessive financial engineering in derivatives trading and off-balance-sheet transactions not reflected on balance sheets.

The S&P 500 index surpassed 4000 points for the first time ever, and the stock market continues its strong trend. He interpreted this stock frenzy during such a volatile period as a signal that the bubble is about to burst.

He also expressed caution about the Federal Reserve (Fed) seemingly fostering market euphoria by keeping the door open for continued easing policies and quietly supporting the Biden administration's massive economic stimulus plan.

He said that COVID-19 has dealt a severe blow to the global economy, taking lives and jobs, and will have long-term adverse effects on the world economy.

He warned that for the global economy to return to a recovery trend, it needs economic growth in the 5% range and interest rate hikes; otherwise, it will be trapped as a zombie of near-zero interest rates, lost money, junk bonds, and an excessively inflated stock market.

He said that if the current situation is the new normal, it is natural for investors to turn to 'safe havens' like Bitcoin, while warning that global financial stability remains very fragile and that ultra-stimulus measures are likely to continue for quite some time.

(Photo by Reuters)

This content was produced with the assistance of AI translation services.