Worldwide credit excess ‘worse’ than pre-GFC: expert…” is fraught with danger and could go badly wrong.”
September 17, 2013
The Swiss-based ‘bank of central banks’ says a hunt for yield is luring investors en masse into high-risk instruments, “a phenomenon reminiscent of exuberance prior to the global financial crisis”.
This is happening just as the US Federal Reserve prepares to wind down stimulus and starts to drain dollar liquidity from global markets, an inflexion point that is fraught with danger and could go badly wrong.
“This looks like to me like 2007 all over again, but even worse,” said William White, the Bank for International Settlement’s former chief economist, famous for flagging the wild behaviour in the debt markets before the global storm hit in 2008.
“All the previous imbalances are still there. Total public and private debt levels are 30 per cent higher as a share of GDP in the advanced economies than they were then, and we have added a whole new problem with bubbles in emerging markets that are ending in a boom-bust cycle,” said Mr White, now chairman of the OECD’s Economic Development and Review Committee.