Mark Mobius Of Templeton “There Is Definitely Going To Be Another Financial Crisis”

Posted By on May 30, 2011

We’ve had some very smart people talk pointedly about this lately…..In an almost verbatim repeat of Carl Icahn’s words of caution which were noted recently, Templeton’s legendary chairman Mark Mobius said that “another financial crisis is inevitable because the causes of the previous one haven’t been resolved.”  And we would venture, that’s official!

The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.  He also blasted the lunacy of  Too Big To Fail, where the Fed and the FDIC took an already unstable system, and made it even more brittle, by concentrating more deposits and more assets with a record low number of banks:  “Are the banks bigger than they were before? They’re bigger,” Mobius said. “Too big to fail.”  And that too is official!

From the Foreign Correspondents’ Club of Japan in Tokyo, Bloomberg reports:

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

OTC derivatives are likely the next source of systemic jeopardy:

The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.

The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46 percent between Lehman’s downfall and the market bottom on March 9, 2009.

He also blasted the lunacy of Too Big To Fail, where the Fed and the FDIC took an already unstable system, and made it even more brittle, by concentrating more deposits and more assets with a record low number of banks:

The largest U.S. banks have grown larger since the financial crisis, and the number of “too-big-to-fail” banks will increase by 40 percent over the next 15 years, according to data compiled by Bloomberg.

Separately, higher capital requirements and greater supervision should be imposed on institutions deemed “too important to fail” to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.

“Are the banks bigger than they were before? They’re bigger,” Mobius said. “Too big to fail.”

For More:www.zerohedge.com

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