BIS: another crisis looms

In June 2007, two Bear Stearns hedge funds collapsed. That marked the start of the financial crisis. The Swiss-based Bank for International Settlements (BIS), an association of central banks, was among the few institutions to highlight the risk of a meltdown before it happened.

Now it's concerned that this recovery could end "with a vengeance". Several emerging markets are flashing red, with credit growth racing far ahead of economic growth, indicating a build-up of debt and vulnerability to a financial crisis. In Hong Kong, for example, the gap between debt growth and long-term economic growth is 30.3; in China it has reached 24.6. BIS considers anything above 10 to be a critical warning.

The entire global economy is now sensitive to interest-rate hikes because total debt ratios are 40% of GDP higher than before the crisis. Loose monetary policy has blown up more asset bubbles, so the danger is that as the US gradually raises interest rates, these will now burst. The global economy, says Ambrose Evans-Pritchard in The Daily Telegraph, "is caught in a permanent trap of boom-bust financial cycles".

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