Policymakers and economists around the world are worried about inflated asset prices that could stir up another financial shock in the near future.
For the countries already hit hardest by the Ebola virus, the deaths and quarantines have caused a loss of productivity. From here experts say there’s no telling how far that can spread.
The inflated asset prices and the loss of productivety due to the spread of the Ebola virus, then the Fed ending QE in October, could be the perfect storm in the making for a global collapse.
The International Monetary Fund (IMF) is warning both policymakers & markets to prepare for higher market volatility ..
“Doing so requires strengthening the system’s ability to absorb sudden portfolio adjustments, as well as addressing structural liquidity weaknesses and vulnerabilities ..
Advanced economies with financial markets at risk for runs and fire sales may need to put in place mechanisms to unwind funds should they come under substantial pressure that threatens wider financial stability.”
MARK COLVIN: The president of the World Bank is asking why it took the world so long to act on Ebola – an epidemic he says could be a risk for the entire world.
Overnight the UN said it would establish an emergency health mission to respond to the crisis.
At the IMF′s semi-annual meetings that wrapped up over the weekend,… global leaders sounded an alarm about the slowing world economy.
On top of this, economists and policymakers, and even some investors, warned that expansionary monetary policies could trigger a global financial crisis.
They pointed to inflated asset prices and the increasing debt levels of many countries.
Bond markets in the eurozone are booming and China′s debt is hovering at a record high despite slowing growth.
Share prices in the U.S. have also soared in recent months, although there was a sharp fall last week.
Still, the European Central Bank is pressuring its member countries to buy government bonds in the eurozone… which would trigger even more of a global buying frenzy for the bonds.
Chief economists at major institutions say central bankers need to be more aware of asset bubbles and act accordingly.
According to a report by the IMF, asset management firms have increased their purchases of bonds from emerging markets to nearly two trillion dollars… from 265 billion dollars in the early 2000s.
Regulators worry that retail investors will pull their money out at the same time when U.S. interest rates rise, triggering another market convulsion in emerging economies.
The Federal Reserve is set to end its current bond-buying program this month.
Its next step would be raising its near-zero rate… probably in mid-2015.
The IMF also called on central banks to be careful when communicating changes in policy… in order to avoid financial market shocks.
Will we see a market decline in the coming months? All indicators seem to say yes. Have you got your financial house in order?
IMF is very worried about an economic slowdown across Europe.