When this crisis ends.
T. Sabri Oncu says the liquidity issues have still not been solved despite huge amounts of QE. So one can expect more crisis to come within the 2008 crisis:
The question is not “if” but “when” the next financial crisis will hit. The 2007 crisis has still not ended. The quantitative easing initiatives of many countries have not had the desired effect of inducing liquidity. Instead, quantitative easing has financed the mopping up of the safest financial assets–including sovereign bonds–by central banks and several banks, effectively leading to another market liquidity crisis.
One unintended consequence of the failed QEs has been that the central banks involved have bought excessive amounts of safe assets, reducing their supply. In addition, because freezing funding liquidity was one of the triggers of the GFC, regulators started demanding that banks and other large financial institutions hold large amounts of liquid assets to protect against funding liquidity freezes during times of financial turmoil, thereby further reducing the supply of safe assets.
This made most of the formerly liquid safe assets, including even US Treasury bonds and German Bunds, less liquid than before. Furthermore, since QEs led to excessively low yields in the countries they have been implemented in, many financial institutions in search of higher yields loaded up their portfolios with illiquid assets.
Let us now recall how the GFC started in 2007 (Acharya and Öncü 2010):
The financial crisis of 2007-2009 to which the Dodd-Frank Act is a response was a crisis not only of the traditional banks, but also of the shadow banks, those non-bank financial institutions that borrow short-term in rollover debt markets, leverage significantly, and lend and invest in longer-term and illiquid assets.
Hence, we are set up for another disaster. So far, we have experienced only a few flash crashes and sudden jumps in interest rates and stock prices, as seen with the US and German 10-year yields, and the Shanghai and Shenzhen stocks just as recently as early June 2015.
When (not if) the next leg of the GFC will hit remains to be seen. All we need now is a straw to break the camel’s back.
It is always about unintended consequences. But this was expected and not completely out of the blue as is the case with most unintended consequences. Economics profession has still not figured this fact. There is very little they can do in such times. Whether you act or not act, both ways you are doomed as a policymaker.
The piece also has a nice discussion on basics of monetary economics..