The Daily Update - Are We Safer? IMF Global Financial Stability Report

The Daily Update - Are We Safer? IMF Global Financial Stability Report

Are we safer a decade after the Global Financial Crisis? This is the heading and theme of this month’s IMF Global Financial Stability Report which marks 10 years since the GFC. The very fact that question needs addressing seems troubling in itself after a decade of financial engineering and regulatory reform.

The hundred pages of useful charts, data and commentary are focused on two key themes.

The Daily Update - Persistent Risks 10 Years On From The GFC

10 years ago today, in the midst of US subprime mortgage market uncertainties and lingering ignorance, BNP Paribas blocked withdrawals from three hedge funds citing ‘The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating.’ Basically, we don’t know what these assets are worth, if anything. Many now see their move as the straw that broke market confidence, halted interbank lending and brought the extent of bad sub-prime assets hastily and plainly into sight. Also on the 9th August 2007, the ECB reacted to their concerns over the euro money markets launching a so called ‘fine-tuning’ operation injecting €95 billion into the banking system (followed by €61bn the next day, €358bn the next and so on). This and other central bank measures across the world clearly helped lessen the blow but weren’t enough to stop the snowball effect and within six weeks people were camping outside UK’s Northern Rock branches, fearful for their savings. We all know the rest of the story too well, which is perhaps not a bad thing.

Wealthy Nations Daily Update - Global Financial Crisis

Yesterday Paramount Pictures released their trailer for a forthcoming film starring Christian Bale, Brad Pitt, Ryan Gosling and Steve Carell. Any initial presumption of the film genre based on this hardy line-up would be wrong. The film is in fact an adaptation of Michael Lewis’s financial biopic “The Big Short” and unravels the story of the US housing bubble and subsequent Global Financial Crisis through the lenses of some curious people who were betting against it. Although the film’s casting might slightly overstate the typical handsomeness of your average financial sector worker, if anything like the paperback, it will certainly highlight the exuberance and liberal lending ethos leading up to the GFC. But poor lending practices weren’t just constrained to the housing market, and warning signals weren’t only found in the delinquency statistics of collateralised mortgage obligations.

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