A new financial crisis is brewing in the emerging economies and it could hit “with a vengeance”, an influential group of central bankers has warned.
Emerging markets such as China are showing the same signs that their economies are overheating as the US and the UK demonstrated before the financial crisis of 2007-08, according to the annual report of the Bank for International Settlements (BIS).
Claudio Borio, the head of the BIS monetary and economic department, said a new recession could come “with a vengeance” and “the end may come to resemble more closely a financial boom gone wrong”.
READ MORE Britain ‘facing lost decade of economic growth’ Behind China's $1 trillion plan to shake up the economic order China sees surprise boost to exports but concerns remain over economy The BIS, which is sometimes known as the central bank for central banks and counts Bank of England Governor Mark Carney among its members, warned of trouble ahead for the world economy.
It predicted that central banks would be forced to raise interest rates after years of record lows in order to combat inflation which will “smother” growth.
The group also warned about the threat poised by rising debt in countries like China and the rise in protectionism such as in the US under Donald Trump, City AM reported.
Chinese corporate debt has almost doubled since 2007, now reaching 166 per cent of GDP, while household debt rose to 44 per cent of GDP last year.
The global economy is caught in a permanent trap of boom-bust financial cycles, a deformed structure becoming ever more corrosive and dangerous as debt ratios rise to nosebleed levels, the world's top monetary watchdog has warned.
The Bank for International Settlements said the rot in the global monetary system had not been cut out since the Lehman crisis in 2008.
Quote:
The current, now ageing cycle could finish in much the same explosive way, contrary to the widespread belief that the financial crisis of 2008 was a once-in-a-century event caused by speculators.
"The end may come to resemble more closely a financial boom gone wrong, just as the latest recession showed, with a vengeance," said Claudio Borio, the BIS's chief economist.
Quote:
Fed rate rises will start to drain the global system of dollar liquidity, setting off a dollar squeeze and driving up borrowing costs across much of the world, the report said.
"The overarching issue is the global economy's sensitivity to higher interest rates," it said.
Quote:
What makes this global picture so combustible is the legacy of cheap dollars that washed across international finance when the Fed slashed rates to zero and launched quantitative easing.
Offshore dollar debt outside US jurisdiction, with no direct lender-of-last-resort behind it, has risen by 50 per cent to $US10.5 trillion since 2008.
The dollar itself acts as a kind of "fear gauge". When it strengthens, banks in Europe and Asia shrink balance sheets through the mechanism of hedge contracts.
The BIS report said: "Global US dollar funding markets are likely to be a key pressure point during any future market stress episode. There are significant roll-over risks, as sizeable parts of banks' US dollar funding rely on short-term instruments (repos, and currency swaps)."
Isn't this just a rehash of the same crap you cut and pasted yesterday.
Financial crises always seems ta 'arrive with a vengeance' ... Guess they'd just be called 'slow unwinds' (or some such?) if they didn't.
But anyways, wot's tha story wif BIS Rufus? - It's "owned by central banks" 'n "serves as a bank for central banks" this says (Oh, 'n is up ta its nuts in tha Basel stuff):
Financial crises always seems ta 'arrive with a vengeance' ... Guess they'd just be called 'slow unwinds' (or some such?) if they didn't.
But anyways, wot's tha story wif BIS Rufus? - It's "owned by central banks" 'n "serves as a bank for central banks" this says (Oh, 'n is up ta its nuts in tha Basel stuff):
Tho by 'n large tha central banks of tha world just pretty much seems ta make their own calls regardless from wot I can sees?
It was set up as an international clearing house. Bank customers who buy and sell internationally are exchanging money constantly and the system needs a clearing house to calculate which bank owes which bank.
For example if I sell some crap to you and you send me a cheque or pay electronically, that is a transfer of money from your bank to my bank. Simple enough with just one transaction but with thousands every minute it takes a whopping amount of infrastructure to be maintained by a trusted 3rd party to work out who owes hpw much and to who, and settle at the close of business every day.
In Australia this is done by the RBA, but internationally it's done by BIS - hence the name (Bank of International Settlements)
It doesn't act as a Central Bank, it's a clearing house.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy