Source: The Daily Reckoning blog, by Craig Wilson
Less than a month ago a handful of the world’s policy makers gathered in Washington at the International Monetary Fund (IMF), no surprising headlines were run — but an obscure meeting and a discreet report launched exclusive signals for the next global economic crisis.
The panel, which included five of the most elite global bankers, was held during the IMF’s spring meetings to discuss the special drawing rights (SDR) 50th anniversary. On the surface the panel was a snoozefest, but reading beyond the jargon offers critical takeaways.
The discussion revealed what global central banks are planning for a future crisis and how the IMF is orchestrating policy for financial bubbles, currency shocks and institutional failures.
Why the urgency from the financial elites?
In theApril 2017 “Global Financial Stability Report,” IMF researchers targeted the U.S corporate debt market and how extreme changes in its equity market has left the global economy at risk. While the report may have been missed by major financial news outlets, it was enough to give major concern to those paying attention.The IMF research report noted:
“The [U.S.] corporate sector has tended to favor debt financing, with $7.8 trillion in debt and other liabilities added since 2010…”
In another segment the IMF report said:
“Corporate credit fundamentals have started to weaken, creating conditions that have historically preceded a credit cycle downturn. Asset quality—measured, for example, by the share of deals with weaker covenants—has deteriorated.”
“At the same time, a rising share of rating downgrades suggests rising credit risks in a number of industries, including energy and related firms in the context of oil price adjustments and also in capital goods and health care. Also consistent with this late stage in the credit cycle, corporate sector leverage has risen to elevated levels.”
This report together with the panel discussion highlights a very concerning trend. Jim Rickards, a currency wars expert and macroeconomic specialist, has identified the special drawing rights (SDR) as a class of world money that is a tool used to bailout central banks during crisis.
World Money, The IMF and Signals for Economic Crisis
World money was praised for its ability to be a catalyst for international loans during the IMF spring panel discussion.
The panel discussion was moderated by Maurice Obstfeld, an established academic who serves as a Director of Research at the IMF. Obstfeld is connected, knows the right people, and can see the macroeconomic implications of SDRs.