[Skip to Content]

Register to receive the OMFIF Daily Update and trial the OMFIF membership dashboard for a month.

* Required Fields

Member Area Login

Forgotten Password?

Forgotten password

Commentary

Thu 18 Apr 2019 / North America

Fed running out of monetary ammunition

It is clear that President Donald Trump's administration is not concerned with whether the US will have enough resources left to fight the next downturn. The president's quest for an ultra-easy monetary policy at this late stage in the economic cycle might cause the US economy to overheat and thereby rekindle inflation. Moreover, it would leave the Federal Reserve with scant ammunition to fight the next recession. With the Fed funds rate already as low as 2.25%-2.5%, further cuts would leave the central bank with limited room to slash rates.

Read More

Thu 11 Apr 2019 / Latin America Caribbean,Middle East,Global

'Submerging markets' pose global threat

Renewed currency weakness in Argentina and Turkey underlines the risks that emerging markets, or rather 'submerging markets', could pose to the global economic recovery. Fortunately, given their relatively small size, the Argentine and Turkish economies cannot by themselves constitute a significant threat. The same, however, might not be said of Brazil and Mexico. Both these countries appear vulnerable to crisis in the light of the seemingly shaky economic stewardship of their respective new presidents.

Read More

Fri 29 Mar 2019 / Europe

UK and Germany 'looking beyond abyss'

Germany and Britain are trying to look beyond the abyss to focus on areas for beneficial bilateral co-operation after the UK's planned withdrawal from the European Union. But a debate on 29 March at the Allianz Forum in Berlin was heavily overshadowed by the impasse over departure. Michael Schmidt, president of the BCCG, presenting to the audience the British embassy-OMFIF report on 'UK-German futures', said: 'To find positive concepts about the future is a much happier task than carrying out a separation.'

Read More

Thu 21 Mar 2019 / Global

Next financial crisis may eclipse 2008

It is difficult to forecast when the next global economic recession will happen. It is much easier to predict its severity. Among the more disturbing vulnerabilities of the global economy is the large amount of debt spawned by the years of ultra-unorthodox monetary policy conducted by major central banks in advanced economies. According to the IMF, the global debt to GDP level is 250% – around 30 percentage points higher than it was on the eve of the 2008 financial crisis, and the mispricing of global debt has become much more pervasive.

Read More

Thu 24 Jan 2019 / Global

Emerging market trials persist

Last year's thrashing in all emerging market investment classes, with debt, equity and currencies in simultaneous decline for the first time in a decade, prompted reconsideration of allocation rationale into the next decade. Crises in Argentina and Turkey in 2018 were in part a replay of 2013 Federal Reserve-induced 'taper tantrum', as retail foreign investors sold indiscriminately. Contagion may yet spread, but for now index performance will continue to be subdued without the spectre of uncontrolled crashes.

Read More

Tue 22 Jan 2019 / Global

Proper perspective on emerging risks

You can hear the bearishness in everyone's voices. They fear a market swoon in a world of unstable politics. Risks are mounting, as indicated by recent data signalling slight economic contractions in Germany and Japan. There is plenty of room for unpleasant surprises, especially from higher debt servicing costs and continuing pressures on some emerging markets. But it is important to keep these risks in proper perspective against a global economy that is slowing, but still very strong, and political tensions that are distracting, but unlikely to trigger recession.

Read More

Wed 16 Jan 2019 / Global

Central banks heading for exit

In among all the concern about economic growth rolling over, it is important to recognise that central banks are still heading to the exit. Just before Christmas the Sveriges Riksbank raised rates for the first time in this cycle, a move that went largely unnoticed. In its monetary report, the Swedish central bank acknowledged that countries were entering 'a phase of more subdued GDP growth' globally. The central bank referenced the uncertainties surrounding Brexit and 'the ongoing trade conflict between the US and several other countries'.

Read More

Tue 6 Nov 2018 / Europe

Country risk from credit derivatives

Countries swapping their foreign currency debt back into their own currency or their domestic debt are as much at risk from credit derivatives as investment banks were 10 years ago. If one counterparty defaults, this could be a huge cost to the other. Most market participants agree to pay some form of collateral when the value of the swap moves one way or another. However, most countries cannot post collateral.

Read More

Tue 30 Oct 2018 / Europe

Ukraine's thorny IMF relationship

The IMF's relationship with Ukraine has always been among its most high profile and difficult interactions. The US and Europe have consistently encouraged the IMF to remain engaged in Ukraine, viewing this as a means of laying a foundation for greater market orientation, integrating Ukraine with the West and diminishing Russia's regional influence. Though the Fund has spared no effort, the relationship cannot be viewed as a success, and the economic promise of the 2014 revolution is not yet close to fruition.

Read More

Fri 26 Oct 2018 / Europe

No-deal Brexit threat to rich EU nations

When examining the potential fallout from the two greatest risks facing European markets, a no-deal UK exit from the European Union and possible Italian contagion, the impact on EU supply chains and cross-border banking exposures is especially important to consider. The EU regions that would be most impacted by a no-deal Brexit are richer and have lower unemployment rates, including southern Germany and the Netherlands. Such regions stand in contrast to Italy and Spain, which are less exposed to the UK through supply chains.

Read More