IGTA Journal - Autumn 2017

ETFs (Exchange Traded Funds), tracker funds that are quoted and traded all day long in real time. Many are used for speculative purposes, which is a source of huge risk. The next risk in line is what is known as "sub-prime" automobile loans – these Americans are certainly incorrigible. We are talking about a figure of around USD 1,200 billion, which is 50% higher than in 2007. These loans have obviously been "securitized" and resold to lenders. They are under surveillance. However, nobody wants to see a second "sub-prime" crisis, but who knows… A European crisis is still possible, which is the reason why safeguards have been put in place. Systemic banks are better supervised with strengthened equity. Will that be enough? "Bail-in" mechanisms have replaced the famous "bail-outs". Shareholders have to come to the rescue rather than governments, which have been bled dry. Italy is still a tinderbox that needs watching. Saving its banks has cost the Italian government dear. Happily, for what it's worth, states are less indebted in Europe as a whole thanks to negative interest rates. Against that, growth is still weak and the political situation fragile, even with Macron's arrival and Merkel's re-election. Geopolitical risk comes next on our list of points that need the greatest attention (e.g. recent Spanish crisis on Catalonia independence). North Korea is a worry, as are some South American countries and the powder keg of the Arab world. Real estate is always a splendid source of risk. The residential sector is dangerous in many European countries in which it is very high. Rising household debt is never good. The deregulation proposed by Donald Trump also looks catastrophic. Thinking that you can deregulate because things will go better is criminal in the view of experts and other economists. Cyber-attacks and the risk of other types of computer crime weigh heavily upon us. There are an increasing number of reports everywhere of hacking, ransom demands and other digital misdeeds. And finally there might be an unexpected and unforeseen event, the famous "Black Swan" event that could spark everything off. A combination or superimposition of some of the selection of risks that I have covered could cause the whole lot to flare up. The risk of another huge crisis has therefore not completely disappeared, I fear. Furthermore, human nature is such that we spend more time on fixing the last crisis than on preventing the next one. Need we fear another crisis? It is reasonable to think so, or at least to bear it in mind. One alert finance person is worth two, as the old saying goes after being tweaked a bit. In the Middle Ages, IGTA eJournal | Autumn 2017 | 42