‘Unprecedented GFC coming’ warns team of Polish mathematicians – NEWS.com.au


A team of mathematicians have made the alarming prediction that a fresh global financial crisis is headed our way.

The Polish researchers pored over the S&P 500 stock market index, and claim the statistics show a dramatic crash is on the cards.

The research was led by Professor Stanislaw Drozdz from the Institute of Nuclear Physics of the Polish Academy of Sciences — and he said we have just over a decade until the “hyper-crash” hits the globe.

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“The data is, unfortunately, quite unambiguous. It seems that since the mid-2020s, a global financial crash of a previously unprecedented scale is highly probable,” he said in a statement.

“This time, the change will be qualitative, indeed radical.”

The team came up with their theory after examining economic data from the 1950s to 2016.

Using the “Hurst exponent” — which shows how likely a market is to experience change through ratings from 0 to 1 — they found stable markets had a rating of around 0.5.

When US investment bank Lehman Brothers went bust in 2008 and the global financial crisis took off, the Hurst exponent fell — and it has not recovered since.

In fact, over the past decade, it has remained below 0.4 — which is apparently a grim sign of things to come.

In other words, “the near future of the global economy looks extremely bleak”, the statement announcing the findings claimed.

It also predicted the next crisis would hit in “a dozen or so years” — or around 2030 at the very latest — “we can expect a financial meltdown such as never before”.

“What is also striking in the changes in the Hurst exponent for the S&P 500 is the shortening time intervals between consecutive crashes and the fact that after each collapse, the indicator never returns to its original level,” Professor Drozdz said.

“We have a clear signal here that the nervousness of the world market is growing all the time, for decades, regardless of changing people, business entities or technology.”

According to the findings, the looming crisis would be a “gigantic collapse” of global markets that would make earlier crashes “appear as minor stumbling blocks in comparison”.

However, Professor Drozdz also noted the crisis was not set in stone, and that it was possible to prevent it by altering certain behaviours.

“If the hyper-crash does occur, we will have shown the power of our multifractal statistical tools in a spectacular way. Personally, however, I would prefer for this not to happen,” he said.

“If this is the case and the hyper-crash does not occur, we will still have the quite acceptable interpretation that our forecast was … correct, but today’s press release will have influenced the behaviour of market participants and, well, we have just saved the world.”

The full findings of the study was recently published in the journal Complexity.

While Australia escaped most of the full brunt of the 2008 GFC, others weren’t so lucky.

In 2009 the International Monetary Fund described the crisis as “a recession unprecedented in the post-World War II era”, with the economies of Latvia, Estonia, Iceland, Ireland and Lithuania among the hardest hit across the world.

Continue the conversation @carey_alexis | alexis.carey@news.com.au



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