EFTA Document EFTA01384462

18 September 2017 Long-Term Asset Return Study: The Next Financial Crisis Why has the frequency of financial crises increased? Financial crises have been around since the Dutch Tulip Crisis in 1637 at the very least but it wasn't until the latter part of the nineteenth century that their frequency increased and they became more global. As the twentieth century approached, globalization was witnessing its first major push and as such, finance became more international with cross border trade and lending increasing. As such, there was opportunity for crises to have wings outside their country of origin. [Figure 21: World Trade to GDP (LHS) and Global Financial Shocks (RHS) 70% a Global Shocks [to of Countries, ANSI World Trade (`k of GDP. LEIS) 6030 30% 20% 10% 0 0 0 Ch Pi Son Deur., On. Haw., Pelee Anna, O. PVT, MVO 41,411 0 §cl 100% 90% 80% 70% 60% 40% 30% As we also saw earlier the two main periods of more concentrated global crises were between WWI and VVVVII, and secondly the period post 1971 after the collapse of the Bretton Woods system. As Figure 22 shows both these periods saw increasing Government debt. [Figure 22: G7 Government Debt to GDP (LHS) and DM Financial Shocks (RHS) 180% T MS DM Shocksl% of Countries. RHS! Govt. Gehl Mot GDP, LHS) 100% 140% 120% 100% 80% 60% 40't, 20% 0% 4 .4 Sacco Dandy an Neer. abbot Annelid Das 90% 80% It's safe to say both periods saw other parts of the economy lever up as well. We can show this aggregated for the latter period (see Figure 23 but there's less data available globally for the former period for non-government debt. Deutsche Bank AG/London Page 17 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0084666 CONFIDENTIAL SDNY_GM_00230850 EFTA01384462