- Global economic growth must slow - the imbalances caused by unsustainable growth before the crisis now need to be rectified, and as they are, growth is bound to be slow. Policymakers should not hinder this inevitable adjustment. The prolonged period of very low interet rates entails risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those countries most affected by the latest crisis.
- The fact that interest rates have been very low for a prolonged period of time, gives rise to (unintented) evolving financial risk
- There are already immense threats to price- and financial stability in emerging countries including China, India and Brazil. All three countries experience similar macroeconomic dynamics as it has been the case for the US, UK, Ireland and Spain in the run-up to the financial crisis 2007. In particular, credit, debt and leverage dynamics of both the financial and the non-financial sector are sky-rocketing - total credit growth is in total over 20% p.a. in China and India. Partly this 'unsustainable' (according to BIS) credit and investment boom is a byproduct of a low-yield environement in industrial countries, thereby providing huge incentives for global investors to invest in emerging countries.
Monday, June 27, 2011
It seems, this time, the Bank for International Settlements (BIS) gets its attention across worldwide newspapers. Yesterday, BIS published its latest Annual Report which includes extensive data analysis and research.