BIS: another crisis looms
The Swiss-based Bank for International Settlements (BIS), an association of central banks, is concerned that the economic recovery could end “with a vengeance”.
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".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
MPs launch inquiry into AI and financial services - is it time to regulate the robots?
The Treasury Committee is looking into the risks and rewards from the rise of artificial intelligence in financial services
By Marc Shoffman Published
-
Dry January for UK equity funds as withdrawals hit £1 billion — where are investors putting their money?
Equity funds got off to a poor start in the new year, posting net outflows in January for the first time since 2023.
By Marc Shoffman Published