The Next Crisis: In 2015?

By Jacques Attali

The future might very soon remind us that, for over a quarter of a century, a major financial and economic crisis has occurred every seven years:
• In October 1987, the Dow Jones industrial average lost 22.6% of its value in a single day; this was the first crash of the computer age. The crisis spread rapidly; on 2 November 1987, it graced the cover of Time magazine: "The Crash: After a wild week on Wall Street, the world is different." The Federal Reserve (Fed) managed to calm the situation.

• In December 1994, while a euphoria ("bubble") of internet-based companies was being pumped up in Silicon Valley, the nearby Orange County turned to derivatives-based speculation, and filed for bankruptcy; a little later, a brutal and brief Asian currency and financial crisis, spread in Russia, Brazil, and then in the United States. Here again, the Fed managed to bring the situation under control.

• By April 2001, the dot-com bubble that was formed over the past five years burst; in one day, the Dow Jones index fell 7.3%. Once again, the Fed managed to calm the situation by creating a flood of liquidity in the economy that will become subprime mortgage loans.

• In the summer of 2008, the bursting of the housing (mortgage-backed security - MBS) bubble triggered a new crisis, truly global this time. The central banks and other lenders allowed once more, countries and businesses, to get into debt with low interest rates, without providing the necessary guarantees that they invest and undergo reforms.

We are nearing the end of a new seven-year period. Bubbles have formed again everywhere. And if growth does not materialize, or if a geopolitical crisis put a halt to it (in Ukraine, China, Brazil or other countries) these bubbles will burst; interest rates will rise; securing debt financing will become very difficult; globalization will do the rest and markets, which no longer say the fair value (Mark-to-market accounting), will panic once again.

In all logic, this crisis should be triggered in 2015. If not adequately prepared for such a crisis, it will be worse than the previous ones, particularly in Europe. For two reasons: firstly, because almost all the trump cards have been played now - no one will be able to run up further debts - and the European Central Bank (ECB), even by using all means at its disposal, including the most heterodox ones, will be able to do virtually nothing. And secondly because unlike previous crises, the world is still far from being at peace; wars and threats of wars, within and between nations, are increasing making investors more risk averse.

Thus there will be no other solutions but to foot the bill; in plain language, this means repaying accumulated debts or cancelling them. But this will only come if, in particular in Europe, that includes the participation of the final holders of the debt, that is to say savers, who will watch their savings being plundered, not by inflation, but by a drain on their bank accounts, as was the case in Cyprus (which the recent agreements on the Banking Union explicitly allow, and known as "bail-ins," though few people know about it).

There is still time to become aware of the situation. And take action. In particular, in Europe, by recreating the means to achieve a resumption of strong and sustainable growth; there are only four ways in which to ensure this, which must be used urgently and at the same time:

1. Taking action to lower significantly the euro exchange rate with respect to the US dollar, which assumes that finally the euro area Finance Ministers ask so explicitly to the European Central Bank (ECB).

2. Boosting investment, which can become a reality only through large-scale public projects, in particular with energy and telecommunications networks, financed by eurobonds, or by the EIB (European Investment Bank), or by the various Caisses des Dépôts Nationales. These institutions would simply need to stop hanging on to their sacrosanct Triple-A rating that paralyzes them.

3. Speeding-up of structural reforms in southern Europe, especially in France, releasing creative powers, as has been done, in different ways, and this has proved successful, by the Germans, British, Swedes and Canadians.

4. An attitude of heart that cares for the pursuit of peace, in particular, between Europeans and their Eastern and Southern neighbors.
If all this is not undertaken very quickly, in a courageous and tenacious manner, particularly by the countries of Europe finally united, many thunderstorms will break out. Within the next 18 months.

No one among us can claim any longer that he did not know.

WHY I AM NOT A DISPENSATIONALIST John Nelson Darby is recognized as the father of dispensationalism later made popular in the United States by Cyrus Scofield's Scofield Reference Bible. Charles Henry Mackintosh, 1820–1896, with his popular style spread Darby's teachings to humbler elements in society and may be regarded as the journalist of the Brethren Movement. CHM popularised Darby more than any other Brethren author. As there was no Christian teaching of a “rapture” before Darby began preaching about it in the 1830s, he is sometimes credited with originating the "secret rapture" theory wherein Christ will suddenly remove His bride, the Church, from this world before the judgments of the tribulation. Dispensationalist beliefs about the fate of the Jews and the re-establishment of the Kingdom of Israel put dispensationalists at the forefront of Christian Zionism, because "God is able to graft them in again," and they believe that in His grace he will do so according to their understanding of Old Testament prophecy. They believe that, while the methodologies of God may change, His purposes to bless Israel will never be forgotten, just as He has shown unmerited favour to the Church, He will do so to a remnant of Israel to fulfill all the promises made to the genetic seed of Abraham. I am not a dispensationalist; it is unbiblical.