IMF warns of new financial crisis if interest rates rise

Fund says governments in emerging markets should prepare now for a new credit crunch because of a 10-year corporate borrowing binge

Rising global interest rates could prompt a new credit crunch in emerging markets, as businesses that have ridden the wave of cheap money to load up on debt are pushed into crisis, the International Monetary Fund has warned.

The debts of non-financial firms in emerging market economies quadrupled, from $4tn (£2.6tn) in 2004 to well over $18tn in 2014, according to the IMF’s twice-yearly Global Financial Stability Report. Continue reading

Is China Preparing for Currency War?

China has entered the global monetary-easing fray, along with more than a dozen other economies, after its central bank surprised investors by cutting reserve requirements 50 basis points to spur lending and combat deflation. But Beijing may be raring for an even bigger and more perilous fight — in the currency markets.

At the same time, something else is afoot in Beijing could have even greater global impact. The central bank is cooking up measures to widen the band in which its currency trades. People’s Bank of China officials say it’s about limiting volatility as capital zooms in and out of the economy. Let’s call it what it really is: the first step toward yuan depreciation and currency war. Continue reading

China Buying Up Latin American Oil

As the world’s number one energy consumer China is enjoying the low prices while they last. Never one to settle however, China is finding still more ways to take advantage of the dire straits gripping several oil producers.

China’s slowdown is real – preliminary data suggests 2014 will mark the weakest GDP growth in 24 years – but the country still has plenty of money to play with that is taking it places the World Bank and the International Monetary Fund (IMF) wouldn’t dare. Their reward? More oil of course. With tough conditions and greater access to raw commodities, China looks to turn the high risk into equal or greater returns. Continue reading

Goldman Sachs executive foreshadows next financial crisis

The second most senior Goldman Sachs executive has warned the world risks sowing the seeds of the next financial crisis through regulation aimed at making banks safer.

Gary Cohn, the global chief operating officer of the Wall St bank, today highlighted the risks of rules forcing banks to hold larger capital buffers so they can absorb bigger losses.

Speaking in Sydney, Mr Cohn said that in forcing banks to hold more capital, regulators risked encouraging the unregulated “shadow” banking sector, so it became the next problem. Continue reading