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Finance Expert on Why Debt-Fuelled Time Bombs Won't Blow Up World in 2019-2020

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A new financial global crisis is nowhere near, although left-leaning US MSM are predicting doom and gloom, according to Fabien Chalandon, a French private investor, banker, and writer. Speaking to Sputnik, he has explained why the world can benefit from US-China trade rebalancing and why Japan remains a serious player in the global economy.

"I do not share the view that the world is facing another 2007 massive crisis", Fabien Chalandon, a French private investor, banker, and writer, told Sputnik, adding that some mainstream media, Bloomberg in particular, are igniting market volatility.

"There are plenty of debt-fuelled time bombs in the world, but none which could individually shake the financial system as was the case ten years ago when the US's reckless mortgage binge combined with absurd levels of banking leverage destroyed banks' balance sheet and individual savings all over the world, thus freezing markets to a standstill with key actors close to or in bankruptcy with liquidity and even solvability issues", the private investor underscored.

A New York Times article titled "Are You Ready for the Financial Crisis of 2019?" noted in December that "financial Cassandras" were warning about the "global debt bubble" and forthcoming crash. Likewise, The Guardian foresees doom and gloom in 2020.

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According to Chalandon, "the US public debt level is still manageable and compared to the size of its economy well below its post Second World and Vietnam War level, its corporations are healthy, and consumers has delevered since 2007". However, there is one exception, namely, the student debt, the banker highlighted.

"Its main problem is the state of its public infrastructure, which is crumbling and needs a massive overhaul", he noted. "The FED has managed to taper its quantitative easing (QE) and implement a much more balanced rate structure without triggering a massive meltdown of markets".

'Trump Rightly Took China Head-On on Trade Issue'

Commenting on the US-China tariff spat the French private investor argues that "Donald Trump rightly took China head-on on the issue of trade, as China represents three quarters of its external deficit, is the largest source of technology pilfering in the world and has closed its key markets to boost local production by local actors".

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Chalandon elaborated that "the rebalancing will trigger a progressive repatriation of supply chains to the US, thus bolstering the US economy, which overall fundamentals are today very healthy".

Meanwhile, China has signalled that it is not going to slash its US Treasury holdings amid the 90-day trade truce. Earlier in December, Trump tweeted that the trade negotiations with China were going "very well".

Even the detention of Huawei's senior executive manage in Canada at the request of the US did not upend the Trump-Xi truce.

White House economic advisor Larry Kudlow announced Tuesday that Donald Trump is "moderately optimistic" about the US striking a trade deal with China by a 2 March deadline, when the mutual tariff truce expires.

"Asia is the world's future growth's pool, where most of the opportunities lie", Chalandon pointed out.

He explained that "China is slowly adjusting from an infrastructure and basic industry-led growth model to a more Western consumer-led pattern of expansion, with lower level of growth rates".

"This relatively unnoticed fundamental change of growth model incidentally has a far greater impact on the structure of trade than the current trade spat with the US. China has an internal debt problem with the quasi banking sector, but capable central bank managers sit on top of these issues. Growth potential is still large as it needs to bring out of poverty around 300 million people", the French private investor underscored.

Why Japan is the Wealthiest Country in the World

According to Chalandon, Japan deserves more careful attention.

"Japan is today the wealthiest country in the world as measured by its external net asset base, which is greater than the sum of the positions of the next two subsequent countries, China and Germany", he emphasised. "It is present in most advanced sectors, including robotics, space, genetics, defence, artificial intelligence etc."

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The banker admitted that Japan's public debt "is a staggering 250 percent of GDP"; however, this is "not a source of volatility, as 90 percent of it is owned by its residents", he explained.

"More importantly it mostly fuelled over the past 30 years a large investment in health and public infrastructure, which is today second to none. Japan has plenty of leeway to increase taxes if needed (sales tax, indirect taxes). In addition, both its consumers and companies are very rich", Chalandon pointed out.

In contrast, Europe remains the "sick" region that prompts serious concerns with its "intractable governance, conflicting policies, anaemic growth and way too high a level of public debt", according to the writer; still, the situation in the EU is not fraught with the risk of a global financial collapse.

"This does not mean that volatility in the markets will disappear", he noted. "But a lot could be said on the nefarious role of Bloomberg in staging business news to ignite volatility way outside the clinical reading of fundamentals, which at the end prevail".

Chalandon underscored that "still overall fundamentals look good, even if the current trade fight can temporarily reduce international trade's contribution to global growth: A rebalancing of US trade with China is good for the US, and therefore good for the rest of the world".

Fabien Chalandon is non-executive chair of Telnic Limited currently living in Kyoto, Japan. In parallel to his investment banking carrier, he co-founded in France and ran a political think tank, Fondation Concorde, was awarded the French Legion d'Honneur in 2000 and wrote for leading French newspapers on political issues. His father, Albin Chalandon, served as minister of various governments under President Charles de Gaulle and Georges Pompidou and then Minister of justice between 2006 and 2008 in a Jacques Chirac led government under then President Francois Mitterrand.

The views and opinions expressed by the contributors do not necessarily reflect those of Sputnik.

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