On Thursday leaders at the G7 in Japan ignored a dire warning issued by Prime Minister Shinzo Abe about the perilous state of the global economy and the risk “of the re-emergence of a Lehman-scale crisis.”
The collapse and bankruptcy of Lehman Brothers in 2008, at the time the fourth-largest U.S. investment bank, was the seminal event of the subprime financial crisis. Its implosion resulted in the loss of more than $10 trillion in market capitalization from global equity markets.
Japan warned “the risk of the global economy exceeding the normal economic cycle and falling into a crisis if we did not take appropriate policy responses in a timely manner.”
Abe presented data showing that commodities prices have fallen 55 percent since 2014, paralleling the drop experienced during the 2008 financial crisis.
Instead of heeding Shinzo Abe’s warning, the G7 insisted in somewhat Orwellian language the worst for the world economy is over and the G7 countries “have strengthened the resilience of our economies in order to avoid falling into another crisis,” according to Mark O’Byrne, writing for GoldCore.
The G7 is comprised of Britain, Germany, Canada, France, Italy, Japan and the United States.
The rosy assessment is countered by reality on a number of fronts, most notably a worsening debt crisis and anemic recoveries across the board, from the United States to the Eurozone and Japan.
In recent weeks bank shares have fallen precipitously and selloffs are occurring in Spain, Italy, Greece and Germany. Economic troubles are intensified by an uncertain geopolitical situation in the Middle East and tensions between the United States, Russia and China.
Instead of focusing on a looming economic catastrophe, the G7 leaders warned against a Brexit. UK voters will decide on leaving the union during a referendum scheduled for June 23.
“A UK exit from the EU would reverse the trend towards greater global trade and investment, and the jobs they create, and is a further serious risk to growth,” they said.