By Kana Nishizawa -Bloomberg News
Mark Mobius, executive chairman of Templeton Asset Managementâ€™s emerging markets group, said another financial crisis is inevitable because the causes of the previous one havenâ€™t been resolved.
â€œThere is definitely going to be another financial crisis around the corner because we havenâ€™t solved any of the things that caused the previous crisis,â€ Mobius said at the Foreign Correspondentsâ€™ Club ofJapan in Tokyo today in response to a question about price swings. â€œAre the derivatives regulated? No. Are you still getting growth in derivatives? Yes.â€
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 Lehmanâ€™s downfall and the market bottom on March 9, 2009.
â€œWith every crisis comes great opportunity,â€ said Mobius. When markets are crashing, â€œthatâ€™s when weâ€™re going to be able to invest and do a good job,â€ he said.
The freezing of global credit markets caused governments fromÂ Washington to Beijing toLondon to pump more than $3 trillion into the financial system to shore up the global economy. The MSCI AC World gauge surged 99 percent from its March 2009 low through May 27.
The largest U.S. banks have grown larger since the financial crisis, and the number of â€œtoo-big-to-failâ€ banks will increase by 40 percent over the next 15 years, according to data compiled by Bloomberg.
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