There happens to be a weird occurrence of financial meltdowns occurring in years ending in "7" in recent history. With that said, next year is 2017. The article cited at the bottom of this post, breaks down the potential vulnerabilities of our global economy. The IMF Global Financial Stability Report that was released earlier this month cites three major areas of concern for our global economy:
1. the unsettled political
climate "which makes entrenched problems harder to tackle"
2. some weak
financial institutions in developed markets
3. heavy corporate debts
in emerging markets
The area of concern that worries me the most and puts our global economy in major vulnerability is the role that "heavy corporate debts play in emerging markets." Peter Coy stated an important point on the role that debt plays on our economy, "Debt fuels growth but also makes borrowers brittle. Debtors keep owing
money even if they lose the ability to repay. If they default, their
lenders are damaged and sometimes default on their own obligations, and
so the dominoes fall."
With that point made, because of low interest rates holding big banks back from helping boost their funds to help them in crisis time will big banks fail again in the year ahead due to this lingering debt issue?
https://www.bloomberg.com/news/articles/2016-10-20/where-the-next-crisis-will-come-from
I share the concern about how debt can play a major role in the economy and how issues with repayment can damage the global economy. The European debt crisis in 2008, is a clear example of this effect that debt can have.
ReplyDeleteDebt can be good or it can be bad. It plays a major role in economies, but it is up to that economy to establish its role so it does not have a negative impact on its future endeavor and nation's growth.
ReplyDelete