Markets’ indicators are showing a lack of any estimation of risk. To begin with, they are at record highs, although some observers say there is still upside potential. Investors’ perception of risk is very slight or zero and, as a result, the risks are very high for them.
Articles by Miguel Navascués
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The central banks are still powerful. They can make the financial markets rise or plunge them into the doldrums. But the CBs need to scrutinise the financial system and its systemic risks more closely.
The main problem from today onwards is not that Catalonia obtains independence, because there is zero possibility of that happening. It’s rather the weakening of Spain and Europe. Prime Minister Rajoy has the law on his side, but he is politically weak. He needs to look for back up outside, from Europe. But effective support, not notional.
Spanish bond prices are not reflecting the risk of Catalan secession simply because the foreign economic press doesn’t rate the likelihood of it happening, nor the conflict which will follow 1-O.
Angela Merkel’s victory in Sunday’s general election in Germany was insufficient and fairly negative for the rest of Europe. For one thing, the Macron Plan, to create fiscal unity, has automatically been pushed back for at least four years.
Unfortunately, the stakes are being upped in this strange and perverse game between Trump and Pyongyang, with increasing possibilities of China becoming involved. A war with North Korea cannot be ruled out.
The problem in Spain’s economy: it’s that productivity is hardly apparent in the breakdown of GDP between the amount of work (number of hours worked) and the residue, which is productivity.
The global economy is not yet back to normal after the crisis. The real figures continue to show that Larry Summers and his “Secular Stagnation” hypothesis are right. We are not strong. And every time we want to break the pessimism, the indicators are weak.
Most of the media has reminded us that on August 9, 2007, BNP Paribas announced it was having problems calculating a reliable net asset value for three mutual funds. So the bank suspended redemptions. The most commonly held view is that this was the beginning – not the origin – of the crisis.
The biggest financial risk this August – a month particularly prone to financial crises, like the last one which began in August 2007 – is geostrategic: the ongoing misunderstanding between Trump and North Korean leader Pyongyang.