In a new report by the International Monetary Fund (IMF) entitled “Global Financial Stability Report: Lower for Longer,” the group gives an overview of the current debt-ridden and precarious state of affairs in global economics. Not lost on some economists, however, is the irony that these modern realities are the direct result of policies historically supported by the IMF itself.
Also Read: IMF Has Another Trick Up Its Sleeve When Fiat Fails – Its Own Coin SDR
Flip-Flopping
The six-chapter, 109-page report breaks down the ominous state of global finance and “identifies the current key vulnerabilities in the global financial system as the rise in corporate debt burdens, increasing holdings of riskier and more illiquid assets by institutional investors, and growing reliance on external borrowing by emerging and frontier market economies.” The assessments are not inaccurate, but fail to turn the lens back on the source, and the very causal factors contributing to these realities.
Citing continued easing and precipitously falling bond yields, the IMF calls for more conservative approaches to the management of economic problems, stating:
To reduce the risk that additional easing may have the unintended consequence of leading to a further buildup of financial system vulnerabilities, macroprudential policies should be tightened, as warranted.
The IMF is suddenly very interested in prudence, and the management of systemic risk, encouraging the use of prescribed tools for mitigating dismal effects of prolonged negative interest, QE and easy credit, and the resultant movement of investors into riskier, more illiquid assets. The report maintains that “Low interest rates have reduced debt service costs and may have contributed to an increase in sovereign debt. This has made some governments more susceptible to a sudden and sharp
