September 30, 2015
Big time meltdown or just more Jew hysteria?
Not I, dear reader.
The International Monetary Fund (IMF) has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates.
The IMF said corporate debts in emerging markets ballooned to $18 trillion (£12 trillion) last year, from $4 trillion in 2004 as companies gorged themselves on cheap debt.
It said the quadrupling in debt had been accompanied by weaker balance sheets, making companies more vulnerable to US rate rises.
“As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures,” the IMF said in a pre-released chapter of its latest Financial Stability Report.
It warned that this could create a credit crunch as risks “spill over to the financial sector and generate a vicious cycle as banks curtail lending”.
In a double warning, the IMF said market liquidity, or the ease with which investors can quickly buy or sell securities without shifting their price, was “prone to sudden evaporation”, particularly in bond markets, when the Federal Reserve started to raise interest rates.
It said a steady growth environment and “extraordinarily accommodative monetary policies” around the world had helped to maintain a “high level” of liquidity. However, it warned that this was not the same as “resilient” liquidity that could support markets in time of stress.
Gaston Gelos, head of the IMF’s global financial stability division, said these factors were “masking liquidity risks” that could trigger violent market swings.
“Liquidity is like the oil in an engine, when there’s too little of it, the machine starts stuttering,” he said.
The IMF said an “illusion” of abundant liquidity may have encouraged “excessive risk taking” by some investors that could cause market ructions if many investors suddenly rushed to the exit.
“Even seemingly plentiful market liquidity can suddenly evaporate and lead to systemic financial disruptions,” the IMF said.
“When liquidity drops sharply, prices become less informative and less aligned with fundamentals, and tend to overreact, leading to increased volatility. In extreme conditions, markets can freeze altogether, with systemic repercussions.”
Could be happening. More interested in Syria right now. But maybe that’s part of the plan…?
We should probably get a group of Black people to try and fix all this.
We could get the guy who wrote The Art of the Deal.