Risk of global financial crash has increased, warns IMF (before we've fixed flaws from last one)

[muriel_volestrangler]

The risk of a global financial crash has increased because a slowdown in China and decline in world trade are undermining the stability of highly indebted emerging economies, according to the International Monetary Fund (IMF).

The Washington-based lender of last resort said the scale of borrowing by emerging market countries, whose debts are vulnerable to rising interest rates in the US, mean policymakers need to act quickly to shore up the financial system.

José Viñals, the IMF’s financial counsellor, said the threat of instability and recession hanging over economies including China, Brazil, Turkey and Malaysia was one of a “triad of risks” that could knock 3% off global GDP. The second, he said, was the legacy of debt and disharmony in Europe, while the third is centred on battered global markets that are more likely to transmit shocks rather than cushion the blow.

At the very least, central banks would need to remain vigilant and be prepared to increase their stimulus programmes should difficulties in emerging market countries spill over into the financial system.

http://www.theguardian.com/business/2015/oct/07/risk-global-financial-crash-increased-imf-emerging-economies-eurozone-stability-report

Massive monetary policy stimulus has rekindled growth in developed economies since the deep recession that followed the collapse of Lehman Brothers in 2008; but what the IMF calls the “handover” to a more sustainable recovery – without the extra prop of ultra-low borrowing costs – has so far failed to materialise.

Meanwhile, the cheap money created to rescue the developed economies has flooded out into emerging markets, inflating asset bubbles, and encouraging companies and governments to take advantage of unusually low borrowing costs and load up on debt.

“Balance sheets have become stretched thinner in many emerging market companies and banks. These firms have become more susceptible to financial stress,” the IMF says.

Meanwhile, the failure to patch up the international financial system after the last crash, by ensuring that banks in emerging markets hold enough capital, and constraining risky borrowing, for example, means that a new Lehman Brothers-type shock could spark another global panic.

http://www.theguardian.com/business/2015/oct/07/next-financial-crash-is-coming-imf-global-stability-report

[enid602]

1. slowdown

It's impossible to know what the impact of the China slowdown will be. Contractions in Russia and Brazil are worrisome as well.

[DetlefK]

2. China is trying to deflate its economic bubble in a controlled way before it can burst:

http://www.truth-out.org/news/item/31478-china-s-communist-capitalist-ecological-apocalypse
China's economy is not in the business of making money. By any means of looking at it, it is not. The purpose of China's economy is to serve the political interests of the Communist Party of the People's Republic of China.

And what is the political interest of the Communist Party? Providing every citizen with a good-paying job, at all costs, consequences be damned.
Pollution be damned.
Corruption be damned.
Wasteful investments be damned.
Ressource-consumption be damned.
Monetary losses be damned.
The only thing that counts is keeping the chinese population economically happy, so they won't even start thinking about demanding political change.

China has 62 million surplus appartments. Surplus appartments, surplus skyscrapers, surplus airports, surplus seaports, surplus stadiums... Because it needs those construction-jobs to keep the chinese people happy.

Vast swathes of chinese agricultural land are literally poisoned. Major rivers are literally poisoned. The air in major cities is literally poisoned.

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China is heavily investing in Africa and setting up trade-agreements there, because they DESPERATELY need the african ressources for the unstoppable growth of the chinese economy that MUST go on forever-and-ever-and-ever-and-ever.

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There are tens of thousands illegal chinese immigrants in the US. And China refuses to take them back. (Citing bureaucratic obstacles.)

Why? Because then the chinese government would have to somehow come up with tens of thousands of jobs for those people.

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Hundreds of thousands Chinese are legally and illegally emigrating to Russia's barely-populated and under-developed north-eastern corner.

I doubt that China is unhappy to see them leave.

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Just 2 weeks ago I read an interview with an economist specialized on China. She said that China is an economic bubble, waiting to burst, because the neverending growth has to end somehow. China is already scaling down its investments to gradually bring the growth down to an acceptable level, but the economist said, they are not reducing the investments fast enough to prevent the bubble from bursting.

[chervilant]

3. "She's gonna BLOW!!!"

Just a matter of time...

(I've forgotten from whence came the quote in my title bar, but I find it predictable that the female pronoun will be used when referring to catastrophic events.)

[prayin4rain]

5. Haha, so true. n/t

[hobbit709]

4. IMF fixes flaws in system that benefit them?

[grahamhgreen]

6. kick

[muriel_volestrangler]

7. FWIW, a kick doesn't work on a thread once it's dropped off the 30 most recent pages

which this one did long ago - GD's 1st 30 pages only go back to Oct 28th. Threads older than that don't make it back onto 'page 1'. So the only person that's seen this is me, because your post is a reply to me and it showed up in 'My Posts'.