Current Account Deficits and Safe Assets

Current Account Deficits and Safe Assets

The International Monetary Fund has issued its External Sector Report for 2017, and among its key findings: “Global current account imbalances were broadly unchanged in 2016…” The U,S. continues to record the largest deficit, $451.7 billion, which is equal in value to 2.4% of U.S. GDP. The continuing deficits contribute to the increase in the […]

A New Banking Crisis?

A New Banking Crisis?

Bad Numbers Today, there are over $3 trillion in stressed loan assets, compared to around $1 trillion of US sub-prime loans which was the catalyst for the 2008/2009 crisis. The World Bank estimates the ratio of non-performing loans (“NPLs”) to total gross loans is comparable the 2009 levels of 4.2% in 2009. Several loci of […]

Matchmaking Finance and Infrastructure

Matchmaking Finance and Infrastructure

The world economy – and emerging market and developing economies in particular – display a gap between infrastructure needs and its finance (Canuto, 2014). On the one hand, infrastructure investment has fallen far short of what would be necessary to support potential growth. On the other hand, abundant financial resources in world markets have been facing […]

Turkey: Lower Reserves and Higher Rates, but Market Turmoil Is Unlikely

Turkey: Lower Reserves and Higher Rates, but Market Turmoil Is Unlikely

Key takeaway – Despite declining reserves and increased interest rates, Turkey is unlikely to suffer a market-crash over the next 12 months. What happened? Since the July 2016 coup attempt, the reserves of the Central Bank of Turkey’s (CBRT) declined. Gross international reserves declined by 14 percent (by USD 14.5 bn, from USD 104.7bn to […]

The IMF’s Flexible Credit Line

The IMF’s Flexible Credit Line

The policy conditions attached to the disbursement of an IMF loan have long been the subject of controversy. In the wake of the global financial crisis, the IMF introduced a new lending program—the Flexible Credit Line—that allowed its members to apply for a loan before a crisis took place. If approved, the member can elect […]

Politics and Budgets

Politics and Budgets

  photo: GotCredit Every year, parliaments in democratic countries discuss budget proposals for the following year to set the course for economic policy going forward. But the reality is that politics and budgets are deeply interwoven. This was recognized by Joseph Schumpeter who noted “the spirit of a people, its cultural level, its social structure, the […]

H2-2017: Where to invest?

H2-2017: Where to invest?

Key takeaway – The investment environment remains challenging. In their portfolios, investors should: i) privilege a multi-year horizon; ii) focus on capital preservation by adopting a defensive risk profile; and iii) accept lower expected returns in exchange for lower volatility. Wealth preservation requires conservative investment strategies, with a greater exposure to alternatives. The recommended strategic […]

Negative Rates – Part 2: A Policy Too Far?

Negative Rates – Part 2: A Policy Too Far?

Negative Reality Debt can only be reduced by strong growth, inflation, currency devaluation (where the borrowing is from foreigners) or default. All the strategies other than growth involve some level of transfer of value from savers either by reduction in the nominal value returned or decreased purchasing power. Growth and inflation are low. Devaluation is […]

We Need More Europe. Which Europe? Hints from Strategic Games

We Need More Europe. Which Europe? Hints from Strategic Games

One of the “consensus views” drawn from the hard lessons of the global crisis exploded in 2008 is that in Europe, and in the Monetary Union (EMU) in particular, the crisis was exacerbated and prolonged by some deficiencies in the original design of the EMU as a supranational institution with the overarching purpose of generating […]

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