15 years later: should we expect a new global crisis and when

September 15 marks the anniversary of the start of the 2008 global financial crisis. In response to it, the entire system of banking regulation in the world was restructured. RBC looked into whether a new crisis will occur and what could cause it

Fifteen years ago, on September 15, 2008, investment bank Lehman Brothers filed for bankruptcy due to its huge positions in mortgage bonds, many of which were secured by toxic subprime mortgages. The collapse of the fourth-largest investment bank in the United States, with $639 billion in assets and $619 billion in debt, is considered the culmination of the American mortgage crisis and, in fact, the beginning of the global financial crisis.

After Lehman collapsed, liquidity in global financial markets evaporated, bad mortgage-related assets were sold at bargain prices, bank customers ran out of money, cross-border trade plummeted – all leading to the worst global recession in 70 years. Regulators responded by tightening the screws (tightening bank capital requirements , increasing oversight of rating agencies, etc.), and Western central banks began flooding the financial sector with money through unprecedented “quantitative easing” programs.

According to the IMF , global GDP fell by 0.1% in 2009, which seems small, but at the time it was the only year-on-year decline in real global GDP since World War II (the second such decline in 2020 was the global recession due to the pandemic, which fell by 2.8%). In 2009, the global economy was largely pulled along by the continued expansion of emerging economies (mainly CHINA ), while the combined GDP of higher-income OECD countries fell by 3.4% that year.

How the global crisis affected the Russian economy

The American mortgage crisis began in August 2007, and at first RUSSIA did not react to it: its stock indices grew until the summer of 2008, reaching a historical peak in May 2008, and the GDP for 2007 increased by 8.5% and expanded until the third quarter of 2008. In January 2008, then Deputy Prime Minister and Finance Minister Alexei Kudrin called Russia an island of stability at the Davos forum, but already in the fourth quarter of that year the Russian economy fell by 1.3% following the Russian-Georgian armed conflict and the collapse of Lehman Brothers. Over the next year, the Russian economy collapsed by 7.8%, which is still a record since the mid-1990s.

Fifteen years is the longest period without a global economic crisis in modern history, excluding the crisis caused by the pandemic, says Anton Tabakh, Managing DIRECTOR for Macroeconomic Analysis and Forecasting at the Expert RA rating agency. From 2010 to 2023 (inclusive, the growth estimate for 2023 is taken from the current IMF forecast), global GDP increased by 58.5%, which is equivalent to an average growth of 3.3% per year.

However, the course of the global economy has not been rosy since the 2008–2009 crisis. In 2010, high public debt in the peripheral countries of the eurozone triggered a debt crisis in Europe, and from mid-2014 to early 2016, the world experienced one of the largest declines in commodity pricesoil . "In 2014, there were also significant shocks in the global economy, oil prices fluctuated greatly. Therefore, I would not say that we survived this period painlessly," notes Alexander Shirov, director of the Institute of Economic Forecasting of the Russian Academy of Sciences.

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The principle of "what if something happens?"

The 2008–2009 crisis led to significant changes in the financial regulation system. “The situation turned out to be a disaster. As a result, we saw a fairly tough tightening of the screws, which not only improved the reliability of the system, but also, for example, made compliance, anti-money laundering, and the principle of ‘just in case’ basic financial behavior,” says Tabakh.

“Conventionally speaking, after all these regulatory measures, the money in the bank is not your money, it is the money of the compliance officer, the regulator, the institution itself, and people are significantly less free,” he notes.

Thanks to all these measures, the old systemic risks were greatly mitigated, Tabakh is sure. He cites the example of the collapse of Silicon Valley Bank or Credit Suisse, which six months later “few people remember” (the latter was under threat of bankruptcy, but was forcibly acquired by UBS). Although technology has now accelerated the spread of financial panic, when Silicon Valley Bank went bankrupt in March 2023, “compared to past crises, everything was done with little bloodshed, because central banks had been preparing for this for many years,” the expert emphasizes.

The 2008–2009 crisis was “flooded with money,” emphasizes Alexey Vedev, HEAD of the financial research laboratory at the Gaidar Institute. “For a long time, a policy of quantitative easing was pursued. Exactly when the central banks of developed countries began to exit their soft stimulating policy, high inflation and the threat of recession immediately arose,” he notes.

According to Vedev, information flows are now faster, and central banks have much more experience in fighting crises. As a result, the "price of the issue" is becoming much lower. "The concept of "crisis" is quite vague. If in 2009 the Russian economy contracted by 7.8%, then when we say "crisis" now, we mean a decrease in GDP in the range of 0.5 to 1.5%. The depth and scale of crises are decreasing: it is unlikely that any of the G20 countries will show minus 10% or minus 8% now," he reasons.

Increased regulation and the vast experience accumulated by central banks have a downside, Tabakh warns. “First, everything remains dependent on regulators, and second, the system may not respond to new risks,” he says.

Moreover, regulatory reforms have largely left out the non-bank financial sector (hedge funds, private equity funds, insurance companies, pension funds), which has taken on many of the risks from the regular banking system, Politico noted in January 2023.

Possible triggers for a new crisis

The pandemic has made the price of the increased role of central banks after the 2008–2009 crisis obvious, Tabakh believes. “As a result, when it came to sorting out the pandemic, it turned out that everyone had quite large debts, and the instruments for lowering rates had been used for too many years. Therefore, it is quite possible that the fact that there was no crisis for a long time is not a merit, but a big shortcoming. The global economy was kept on various crutches and support measures for almost the entire 2010s,” the economist reflects.

The causes of the new global crisis will be different from those that caused the shock of 2008, but they cannot be predicted, experts agree.

According to Oleg Buklemishev, Director of the Center for Economic Policy Research at the Faculty of Economics at Lomonosov Moscow State University, crisis phenomena may be caused, for example, by “ energy with a green transition ” and “ the erection of barriers in global trade and investment .” Another potential long-term crisis factor is Africa with its growing population. “This population will need to be occupied with something productive, fed somehow. And this is also a problem for the global community, and therefore, it may well become the cause of a new global crisis, for example, a social or migration crisis,” Buklemishev does not rule out.

The crisis may be triggered by the fact that from 2009 until recently, a soft monetary policy was pursued , and now some tightening is taking place , Vedev points out. “Economics have already adapted to cheap money, and when there is a sharp change - and for a developed economy, the transition of the key rate from zero to 5% is very decent, a crisis may well occur,” he explains.

The 2008–2009 crisis triggered a change in the global economic model, notes Shirov. If before the 2008 crisis, there was a significant outpacing of global EXPORT growth over GDP growth rates, and global trade was expanding, then afterward, the share of global trade in GDP began to stagnate . “In essence, global trade is developing either at the same rate as global GDP, or even slower. We have entered a new phase of growth, because the factors that enabled developed and developing economies to develop well before the 2008 crisis no longer work that way,” Shirov notes.

This is also related to the tension that arises between large developed and developing countries, he notes. "Because, on the one hand, China and other countries have grown in size, in their economic power, on the other hand, the factors that allowed them to do this no longer work as they did before. And this is the main contradiction," the economist emphasizes.

The Chinese economy, which has been growing at about 7% per year for several decades, has accumulated many problems, Buklemishev notes. This includes the real estate sector with companies that do not pay their debts on time, and the slowdown in export activity, and the technological war with the United States. According to the expert, China is now a vulnerable spot in the global economy, its economy "has accumulated pain points that may sooner or later make themselves known."

"I don't see any signs of a global crisis yet. The American economy is unexpectedly showing better results than it was. China, by the way, has slumped a little, but I don't think this is a death sentence - they also have their own logic, their own economic restructuring. In principle, I don't see any explosive topics yet," VTB Bank CEO Andrey Kostin told RBC, but he made the reservation that no one expected the covid pandemic either.

JPMorgan CEO Jamie Dimon warned on September 11 that while the US consumer is doing well, it would be a “big mistake” to think that the favorable economic climate will last for many years. Among the main risks, he named “quantitative tightening” by global central banks (QT, a process that reverses the unprecedented liquidity expansion programs launched since late 2008), the Ukrainian conflict, and the fact that governments around the world are “spending money like drunken sailors.” “There are still very big and very dangerous uncertainties ahead,” the banker warned .

Even a small bubble can trigger a crisis if it starts a " domino effect ," warns leading expert at the HSE Development Center Sergei Pukhov. Central banks identify such bubbles and take measures to avoid a severe economic downturn. In this case, if a crisis does occur, it will end quickly, and the economy will be able to return to its previous growth trajectory, he believes.

However, serious changes are currently taking place in the global economy, reminds Pukhov. “Globalization is being replaced by regionalization and worsening relations between the North and the South, geopolitical tensions have increased sharply . The era of low interest rates and inflation is over. Access to new technologies is being restricted for security purposes,” the expert lists. In addition, according to him, “there are many questions about the global currency system, the role of the DOLLAR in foreign trade and investment.” “Unlike economic triggers, all these problems can lead to a more significant reduction in the potential for economic growth,” Pukhov warns.

Artificial intelligence could be at the root of the next financial crisis , US Securities and Exchange Commission (SEC) Chairman Gary Gensler regularly warns. In August 2023, he told BLOOMBERG that such a crisis could occur in 2028–2032. Back in 2020, Gensler wrote an article outlining five factors that make the financial sector increasingly vulnerable to AI, including the monopoly of corporations like GOOGLE on data (leading to models being built on the same data sets), the proliferation of chatbots, voice assistants (which are beginning to penetrate the sphere of investment recommendations), the possibility of algorithmic coordination, which increases the risk of “herd” behavior in the financial market.

Russia in new conditions

The structural transformation of the economy, isolation from the West and reorientation to the East will not give Russia immunity from the shocks of a new global crisis, most experts believe.

"I would not claim that we have fenced ourselves off from everyone, immunized ourselves from the consequences of global crises. Russia, thank God, remains an economy that is tied to the global economy. Since we remain such, this still means that we are vulnerable to a global crisis," Buklemishev asserts.

Moreover, if the source of the crisis is China, it will affect Russia first and foremost, and it will be “even more painful at a time when we are cut off from half of the markets by the currency factor and various embargoes,” he warns.

According to Vedev, if a global financial crisis does break out, in the current conditions it will have a minimal impact on Russia, because now "the country is living with internal problems." These include the level of inflation, the shifted structure of the balance of payments, and the exchange rate. "It is the game with the exchange rate that is most dangerous for financial stability," the economist warns.

Russia will likely remain an export economy, strongly linked to the global one — perhaps less in the financial sector and more in terms of foreign trade, Tabakh is sure. Therefore, “a global crisis, whether it comes from the East or the West, will affect the Russian economy quite strongly.” How much it will suffer depends on the type of crisis, he says. “For example, the Russian economy suffered less from the pandemic than many others, due to its structure and inertia. But in 2008-2009, it suffered greatly, again due to the financial and economic structure,” the economist reminds.

In the face of Western attempts to isolate it, Russia is building an alliance with the "South", primarily with China, where technologies have become competitive, says Pukhov. In any case, even greater isolation from the Western system will not save us from the crisis, although it may be milder, he believes. "Ultimately, we will survive this crisis too. The main question is how much the potential for economic growth can be increased in the face of rising military-industrial complex spending, what investments will there be in human capital and technological development," the expert reasons.

Experts admit that it is not worth counting on the fact that, as after 2008, the Chinese economy will pull the world economy up with its own incentives. Since 2008, the Chinese economy has grown almost 2.6 times, and "now they no longer have such ease in overcoming crisis phenomena," Shirov warns. China based its growth on the permanent expansion of exports, but now this is hardly possible, "now the problem is how to switch growth factors from the external factor, which is limited, to the domestic market," he concludes.