Monday 29 October 2018

Former NZ Reserve Bank governor gives warning

Former RBNZ Governor: A decade of high debt and loose money comes home to roost

26 October, 2018

Alan Bollard joins the line up of ex-central bankers sounding warnings about “loose money” that occured on their watch. We’ve heard “warnings” from Greenspan and Bernanke in the USA in recent years. And former UK prime minister and chancellor of the exchequer Gordon Brown just last month warned we were sleepwalking into a crisis.

Now Bollard says:

It may be that some future economic risks are not yet fully priced into markets. Already there have been significant swings in exchange rates as the US reserve currency strengthens and some third countries are considering erecting new tariff structures themselves.

Apec finance ministers are convening to address these issues, including growth prospects and how to make tax policies, financing and economies more effective and inclusive. But now, as they prepare their advice for the region’s leaders, including Prime Minister Jacinda Ardern, to meet here in November, there is another issue on the agenda – new economic and financial risks.

Since the global financial crisis, financial sector debt has decreased appropriately, but cheap credit has brought mounting debt in the private sector and state-owned enterprises in emerging markets. Deteriorating local currencies and tightening international monetary policy could make it difficult to service some of this debt. Tariff increases causing domestic inflation would worsen policy options.

Ten years ago, we saw how badly managed financial risk could hurt the world’s economies. A decade later, we do not want to see how badly managed economic risk could trigger another financial crisis.”

'The world is sleepwalking into a financial crisis' – Gordon Brown

Former PM delivers scathing analysis of how the problems of 2009 remain unresolved

A leaderless world is sleepwalking towards a repeat of its near meltdown in late 2008 and early 2009 because it has failed to remedy the causes of the financial crash of a decade ago, former prime minister Gordon Brown has warned.

Britain’s leader during the period when the collapse of the US investment bank Lehman Brothers put every major bank at risk, said that after a decade of stagnation the global economy was now moving into a decade of vulnerability.....

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