Howard Gold writes for Columbia Journalism Review about whether business journalism will catch the next economic crisis.
Gold writes, “Where will the next crisis come from? Speculative buying of stocks with borrowed money led to Black Monday in 1929; computerized ‘portfolio insurance’ and index arbitrage triggered the crash of 1987; the dot-com boom turned into the dot-com bust in 2000, and the housing bubble, subprime mortgages, and speculation in exotic derivatives caused the most recent financial crisis and Great Recession.
“‘I think that the next crisis is not going to come from mortgage-backed securities. It’s not necessarily going to come from the banks,’ says Tett. ‘I think the longer we get away from the last crisis, the greater the danger of complacency.’
“A cursory review of financial media over the last couple of months revealed many stories about potential stock market overvaluation; the threat from tariffs and trade wars; potential dangers from subprime auto loans, student loan debt and too much government and household borrowing; underfunded state and local pension funds; deteriorating credit quality in both high-yield and investment-grade corporate bonds; loosening credit standards in private equity buyouts, and rising instability in emerging stock and bond markets. Any of these could bring on the next crisis—or not.
“‘I think that it was such a shattering moment for so many people who lived through it that it’s hard to shake that, so I think that people are looking for indications of problems that might lie ahead,’ says Morgenson.”
Read more here.
