The International Monetary Fund (IMF) draws attention to the August stock market crisis as “a glimpse” of a serious global scenario if there is an explosive combination of risks arising from current “fragility” on a global scale. The warning is left by the Global Financial Stability Report (GFSR) released this Tuesday by the Fund. “Decision makers must remain vigilant about the medium-term outlook”said Tobias Adrian, responsible at the IMF for publishing the GFSR.
The IMF report points to seven “vulnerabilities” that are marking the global situation and which could have medium-term negative impacts if they worsen. GFSR puts in mind the glaring contradiction between rising geopolitical risks and uncertainty on the one hand and investor optimism in financial markets on the other.
What joins the excessive valuations in sectors such as technology and on various stock exchanges of shares, the global debt spike to close to 330% of GDP at the end of the first half of this year, lack of transparency about the true degree of leverage in the ‘shadow’ financial sector (of non-bank entities), the synchronized slimming of central bank balance sheetso intertwining between the cryptocurrency market and the financial system and crises that China.
The “good news,” said Tobias Adrian, “is that, in the short term, risks to financial stability remain contained.”
