Financial crises are 'now the rule' and another shock is coming sooner than later, Yale economist warns

• Financial crises are the new normal in the current era, according to Yale economist Stephen Roach.
• A crisis arrives somewhere in the world on average once every three to four years, he estimated.

Financial crises are the new normal, and a shock could be headed for the economy "sooner rather than later," according to Yale economist Stephen Roach.

Over the past few decades, a crisis arrived somewhere in the world on average once every three to four years, he wrote in an op-ed for Project Syndicate on Thursday, pointing to a string of disasters that have continually bombarded the world economy since the 1980s.

"It is time to stop viewing crises as exceptional events and admit how frequently shocks actually occur," Roach said. "Crises and the 'extraordinary' developments they spawn are now the rule, not the exception," he later added.

That's partly because one crisis often leads to another, he explained, citing the oscillation in monetary tightening and loosening from central bankers.

Asia's financial crisis in the late 1990s, for instance, eventually led central banks around the world to dial back interest rates to near-zero. That produced asset bubbles, which were partly responsible for the onset of the Great Financial Crisis in 2008.

In addition, policymakers tend to focus on solving problems that led to the last crisis without considering what could cause another one, Roach added.

"While another crisis is coming, probably sooner rather than later, aligning forward-looking policy with the pitfalls of a highly uncertain future is the functional equivalent of balancing a heavy weight on the head of a pin," he said.

"But that hardly justifies self-serving excuses for policy mistakes or portraying asset-market mispricing and economic dislocations as unavoidable accidents arising from so-called unprecedented circumstances."

Rather than trying to predict the next coming disaster, he suggested it was more important to boost the resilience of the economy to coming shocks.

Other forecasters have warned of another impending financial crisis or recession in the US as interest rates look poised to stay higher for longer.

Higher borrowing costs tighten financial conditions, which could break what some have called a "speculative bubble" forming in stocks, bonds, and other debt assets over the past decade.