Yet achieving these targets would create sufficient combustible material in the shadow banks to make a crisis just a matter of time.
But their task would have been well-nigh impossible but for the ultra-low global interest rates that have allowed politically paralysed eurozone officials to skirt needed debt write-downs and restructurings in the periphery.
Latest Stories. Thus, instead of leading to lower global real interest rates, a Chinese slowdown that spreads across Asia could paradoxically lead to higher interest rates elsewhere — especially if a second Asian financial crisis leads to a sharp draw-down of central bank reserves.
So does Japan. Loading comments… Trouble loading?
This can be measured by looking at monthly data showing the gap between deposits and loans including disguised loans. This means that the haircut shifted losses from one government branch to another.
First, the effect on international capital markets could be vastly greater than Chinese capital market linkages would suggest.
Their wealth actually contributed to the last financial crisis by pumping liquidity into global markets. This is explained on the one hand by enormous stimulus measures in the aftermath of the global financial crisis, and just the simple business of prolonged loose credit conditions fueling the Chinese economy through state banks. In other words, if enough of that Chinese domestic debt has been pumped not into sound investments but into white elephants, then that debt could lead to crisis.
But the acute pain, according to the IMF, will be more regionally concentrated and confined than would be the case for a deep recession in the United States. The October 2015 interest-rate liberalisation made financial repression a thing of the past. As Lowe pointed out, most countries with rapid credit growth have a financial crisis and a recession.
Government-owned banks lend money directly to government owned corporations. Order by newest oldest recommendations. Today, the huge supply shock comes from the productivity of China's cheap labor pool gaining access to Western markets. High Asian saving rates over the past two decades have been a significant factor in the low overall level of real inflation-adjusted interest rates in both the US and Europe, thanks to the fact that underdeveloped Asian capital markets simply cannot constructively absorb the surplus savings.
Indeed, China accounts for fully one-third of the global increase in private debt since the financial crisis. Although it is true that the US is still by far the biggest importer of final consumption goods a large share of Chinese manufacturing imports are intermediate goods that end up being embodied in exports to the US and Europe , foreign firms nonetheless still enjoy huge profits on sales in China. Read More.
Share to facebook Share to twitter Share to linkedin. Nor is the US immune.
All three markets have of late shown signs of overheating.