Economic crises of 2023 and 2008: causes and consequences

On March 21-22, a meeting of the US Federal Reserve, an analogue of the Central Bank of the Russian Federation, was held, the decisions of which, in particular, to raise the key rate, affect the financial systems of many countries of the world. Stanislav Bovt, financial analyst of the CMS group of companies, expressed his point of view on the current and future state of the world economy to Moskovskaya Pravda.

Experts’ fears were confirmed: the US Federal Reserve raised the key rate by 25 basis points to 4.75-5%. Since March 2022, the rate has increased by a total of 500 basis points. At the same time, it is quite possible that another increase in the key rate will take place in May as well. So, given the problems in the US banking sector and the bankruptcy of Silicon Valley Bank and Signature Bank, all signs of an economic crisis are evident.

“The banking crisis that has swept through Europe and America in the past two weeks is somewhat similar to the global financial crisis of 2008, when bad loans brought down the financial system, and with it created enormous problems for the entire global economy,” says Stanislav Bovt. “Today, experts say that the situation is not as catastrophic as it was 15 years ago, and the problem is not so much in bad loans, but in the alleged paper losses of banks and panicked depositors. In 2008, $800 billion was allocated to the Troubled Asset Relief Program, and today about $650 billion is needed to pay off depositors. Despite the difference in the causes of the crisis then and today, I believe that in both cases the consequences are the same – loss of confidence in financial institutions.

According to the expert, a recession in the United States cannot be avoided, and the consequences for the global economy will be serious.

– I think at yesterday’s meeting of the Fed there were a lot of disputes about what to do – pump banks with liquidity or fight inflation? However, once again raising the key rate, the Fed made it clear that the fight against inflation is a priority. And the banking sector reacted to this by falling, which is already familiar in recent days. I would like to note that, for example, companies dealing with commercial real estate lose about 30% of their capitalization per month. Plus, the decline in profits of companies in the traditional economy will inevitably add fuel to the fire,” notes Stanislav Bovt.

The expert believes that the consequences of the current crisis will be less than in 2008, but quite tangible. Although it should be taken into account that crises often do not develop according to predictable scenarios. So no one has the certainty that another “black swan” will not arrive.

Alena Bodrienko.

Photo bedney images / Freepik