How do we overcome a debt crisis with more debt? Bocconi University’s Marcello Minenna recalls that in a world with inflation it is always possible to control the behaviour of the debt/GDP ratio just by reaching negative real interest rates. Also, he points out that eight years after the financial meltdown the tight interconnections in real time between the global markets make the system intrinsically unstable.
The slowdown in oil prices affects all producer countries, both emerging and developed, whether Brazil, Mexico, Norway or the United States. The difference with the 90s is that EM are now much more solid.
By Alicia García-Herrero at Bruegel | Sitting on a pile of debt, China’s only way out is to deleverage: more pain now for sustainable growth later. [Figure: China’s augmented fiscal deficit as % of GDP.]
By James Alexander via Historinhas | Although it appeared that the VSPs gathered in Jackson Hole could only worry about non-existent inflation, I detected a defensiveness too.
Could emerging markets spillovers push developed ones into recession?
Brazil’s financial markets are being hit by political turmoil, economic deterioration and external factors.
The Chinese authoritiess’ failure to prevent a stock exchange meltdown is casting serious doubts on economic prospects and so fuelling further losses.
On the policy front the Chinese state continues to wield its influence over large parts of the real economy.
US consumer confidence surged to 101.5 in August thanks to the positive evolution of the labour market.
The adjustment is serious and is a reaction to the eruption of China’s triple bubble: credit, real estate and stock markets.