Consumers and investors should avoid getting trapped in a financial crisis, because many firms and lenders will make risky bets on the future of the financial system, according to a report released Wednesday.
The Center for Responsive Politics estimates that as much as $700 billion in the financial market could be lost if investors are unable to access the money they’ve put down, because of a combination of bad business practices and financial mismanagement.
A key takeaway from the report is that investors should understand the risks associated with these investments and be prepared to put money in these investments if necessary.
“The stakes are high, and many of the investments we are discussing are ones that could be at risk of losing their value,” said Matt O’Brien, a professor of finance at the University of Massachusetts, Amherst.
The report is the latest in a long string of research showing that financial markets are in a bubble, and that investors have a duty to protect themselves.
Last month, the Congressional Budget Office released a report that said the nation’s financial system was at risk from an economic collapse, and the risk of a financial crash was higher than ever before.
The latest report comes on the heels of a report from the Federal Reserve Bank of New York that said in July that the economy is expected to add more than 1.4 million jobs this year, and more than 600,000 in 2021.
The Federal Reserve Board has already started to respond to this new outlook.
In July, the bank raised its growth outlook to 2 percent and the central bank is considering increasing interest rates to help boost economic activity.