“Vzglyad”: Fears of an American banking crisis threatening the global economy | economy

The Russian newspaper Vzglyad revealed in a lengthy report mounting indicators of a new financial crisis whose effects may extend to the global economic system, similar to what happened in 2008.

Writer Olga Samovalova explained that gold rose to new record levels approaching $4,400 per ounce, while US stocks fell and Treasury bond yields rose, reflecting a widespread state of tension in the financial markets.

The newspaper indicated that the main reason behind this turmoil is the large losses incurred by two American banks as a result of non-performing loans, in a scene that brings to mind the beginnings of the financial collapse 17 years ago.

Signs of a expanding crisis

Vzglyad confirms that the spark of the crisis was reignited after Zions Bank announced losses worth $50 million in the third quarter, which led to a decline in its shares by 13%, while Western Alliance Bank shares fell by about 11% following the discovery of a fraud related to one of the borrowers.

Despite the efforts of the American authorities to contain the situation, the state of anxiety quickly spread to the markets, amid indications of the fragility of the banking sector.

Financial analyst Tony Sycamore of IG said in a statement reported by Reuters, “The measures taken in 2023 were aimed at avoiding a banking crisis, but in reality they may have paved the way for a new crisis,” noting that last year’s bankruptcies were just a prelude.

Investor anxiety and the “iceberg”

Russian expert Alexander Bakhtin from Garda Capital explained that the announced losses are only “the tip of the iceberg,” and that what the American financial system is hiding “may be much more dangerous.”

Bakhtin said that the size of the announced losses – despite its relative modesty – raised deep fears among investors that there were larger banks facing similar problems, which prompted them to sell stocks on a large scale, and led to American banks losing about 7% of their market value within a few weeks.

He adds, “Troubled debts in the American business sector are no longer a theoretical problem, but rather have become a reality that portends a gradual collapse in some institutions,” recalling that the US Federal Reserve succeeded temporarily in 2023 in rescuing Silicon Valley and First Republic banks, but failed in 2008 when the crisis swept the global economy and caused the closure of 500 American banks between 2008 and 2015.

The banking system is on the verge of danger

Bakhtin warns that lowering interest rates alone will not be enough to avert the next crisis, adding that “no one knows the true extent of the problems within the American banking system.”

He pointed out that if unpaid loans exceed critical levels, this could lead to a “comprehensive crisis that is difficult to contain,” pointing out that such crises cannot be predicted in advance, because the collapse of confidence occurs suddenly and at a speed that exceeds the ability of the authorities to intervene.

In the same context, financial expert Yulia Kovalenko stressed that a crisis of this magnitude “will not remain within America’s borders,” explaining that the decline in liquidity in American banks will have an immediate impact on the global economy given the United States’ pivotal role in the international financial system.

Kovalenko said, “What is happening today is in many ways similar to the mortgage crisis of 2008, where the phenomenon of default and financial fraud is repeated, leading to a decline in the stability of credit institutions.”

A cascade effect on Russia and emerging economies

Although economic relations between Moscow and Washington are at their lowest levels, Bakhtin believes that Russia will not be isolated from the repercussions. He explained that the Russian economy “is still integrated into global markets, albeit through different channels,” adding that any decline in global demand for basic commodities such as oil, gas, and metals will reflect negatively on Russian exports.

The expert said that the result will be “a decrease in the inflow of hard currencies and a decline in the ability of companies to import equipment and raw materials,” which will lead to a slowdown in industrial production and a decline in corporate profits and public revenues.

At the conclusion of her report, Vazglyad stressed that the world stands on the brink of a new financial crisis, in light of the decline in confidence in the American banking system, and the return of gold to play its role as a “last resort” in the face of a possible collapse in the markets, considering that “the crisis this time may be deeper and more comprehensive than the one the world experienced in 2008.”