Investing
Bank For International Settlements: Deficits Are Crippling
Published:
Last Updated:
The Bank for International Settlements made two observations in its 8oth Annual Report. One made sense. The basis for the second is a mystery.
Much like the declaration of the G-20 nations, the BIS believes that the preeminent threat to the global economy is deficits.
“The first and most immediate challenge is to make a convincing start on reducing budget deficits in the advanced economies. Placing public debt on a sustainable path must be accompanied by structural reforms to enhance sustainable growth.”The second problem mentioned in the BIS report was that central banks need to raise the cost of borrowing.
“The second challenge is to foster the strengthening of balance sheets and necessary behavioural changes in the financial industry. Official support was intended to facilitate orderly adjustment. But if such support is maintained for too long, it will create moral hazard, undermine private sector financial intermediation and generate new, hidden risks.”
The notion that low-interest rates increase “moral hazard” as access to cheap money builds bubbles is probably true. But that is more than offset by the need in the US, Japan, and Europe to continue to fund sovereign debt, to rebuild industry, to encourage job creation, and to improve consumer credit to stimulate consumer spending.
There are not many interest rates hawks in the central banks of the world’s developed nations, and that may not change until well into 2011-if the GDP of these countries begins to rebound.
Douglas A. McIntyre
Sponsor: 26 Cheap Stocks to Sell – Cheap stocks have been on a tear recently, but nine out of ten stocks are circling the drain!
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the
advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.