Will the Financial World End on November 23?

Research firm Exclusive Analysis says the financial world is doomed. According to a report by CNBC, “there is a 65 percent chance of a banking crisis between November 23 and 26 following a Greek default and a run on the Italian banking system.” The experts at Exclusive Analysis are skilled enough to predict this with complete assurance. Yet, the days will almost certainly come and go uneventfully. Exclusive Analysis will have its 15 minutes of fame and then the humiliation of being wrong.

The forecast is based on a simple but unsupported premise. Exclusive Analysis says the disaster will begin with  a “sudden crisis in which the US, UK and BRICs nations refuse to provide funding via the IMF for the eurozone.” Greece and Italy will collapse financially. The banking systems across the world will fall into disarray as financial firms face hundreds of billions of dollars in losses.

The prediction assumes that the European Financial Stability Facility lacks enough capital to prevent a crisis. That is true. The fund only has a lending capacity of 440 billion euros. Combined with the capital the International Monetary Fund could contribute and emergency funds from Germany and perhaps the U.S., a disaster could and probably would be averted. The Exclusive Analysis report is based on the belief that, after the crisis of 2008, the world’s most powerful nations financially would allow a similar catastrophe again.

The financial world will not plunge into an age of darkness. The problems of Italy and Greece are both severe and threatening. The rescue of Italy would require access to capital from a number of nations. Almost all of them will give it instead of standing by while a sovereign crisis destroys the global economy.

Douglas A. McIntyre