Bank for International Settlements annual review points to mounting economic and financial instability
==========

The annual report of the Bank for International Settlements (BIS) presents an upbeat assessment of the world economy and financial system on the surface, but warns of risks on the economic and financial front. The BIS cautions against premature easing of interest rates, as it could reignite inflationary pressures and force costly policy reversals. It emphasizes the need to maintain and strengthen the dictatorship of central banks over the economy, shielding them from political pressures. While the immediate situation is upbeat, the longer-term outlook is not optimistic, with financial vulnerabilities, fiscal positions, and subdued productivity growth casting a shadow. The BIS warns of tougher tests ahead and indicates that financial cycles have started to turn, savings buffers are dwindling, and debts will have to be refinanced. Commercial real estate poses a greater risk to financial stability, with falling demand for office space and higher interest rates leading to downward pressure on prices and losses for lenders. The BIS also points to the dangers of the growth of government debt, which could raise the risk of bond market dysfunction. The report highlights the growth of private credit funds and the difficulty in assessing the risks involved. The BIS identifies two targets for policy prescriptions: the wages of the working class and government spending. It suggests that real wages must be maintained at lower levels through high interest rates and warns of persistent wage demands. It also calls for fiscal consolidation, which would involve major cuts in social spending. Overall, the report points to mounting economic and financial instability.

#BankForInternationalSettlements #Economy #FinancialSystem #InterestRates #Inflation #CentralBanks #CommercialRealEstate #GovernmentDebt #PrivateCreditFunds #Wages #FiscalConsolidation

https://www.wsws.org/en/articles/2024/07/02/tlsm-j02.html