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To read an extract on gaps in the global financial safety net, written by Danae Kyriakopoulou, chief economist and head of research at OMFIF, click here.
Markets have entered 2018 facing contrasting realities between a strengthening real economy and a build-up of financial risk. Global markets including the FTSE 100 and MSCI World Index ended 2017 on record highs. But growth has largely been credit-fuelled, suggesting it may have been generated by unstable financial systems. Global debt has reached levels never seen before, at three times the size of the global economy.
Economic history suggests this divergence is unlikely to continue. The question is when and how it will stop, and what direction it will take. Will stronger growth help reduce financial risks, or will asset market bubbles burst, damaging the real economy? This is the question we have tried to answer in this month’s Bulletin.
Some markets are already seeing a correction. As anticipated by our Advisers Network, the price of bitcoin has dropped substantially since the start of the year. However, there is still a lot to expect from the underlying blockchain technology, as OMFIF’s digital experts explain – even CryptoKitties and Dogecoin.
We also investigate investment allocation trends such as the shift of pension funds away from fossil fuels and the need for regulation to support a further move towards sustainable assets. Global public investors must not forget warnings that environmental risk could be the ultimate threat to financial stability for this generation.
The Bulletin brings together a diverse set of views on the future of finance. We host voices from central banks, development banks, academia, journalism, government and the private sector. Key contributors from this month include:
- Kalin Anev Janse, secretary general of the European Stability Mechanism
- Philippe Desfossés, chief Executive Officer of ERAFP, the French public sector pension fund
- Jun Saito, senior research fellow at the Japan Center for Economic Research
- Robert Stheeman, chief executive of the UK’s Debt Management Office
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