Bill White is the former chief economist for the Bank of International Settlements (the international board of central bank heads), and he’s now head of the OCED review board. His message at Davos this week is rare sobriety amid liquidity-drunk, risk-blind attendees. See World Financial System is ‘most over-stretched since 2008’ warns OCED economist at Davos:
“All the market indicators right now look very similar to what we saw before the Lehman crisis, but the lesson has somehow been forgotten,” said William White, the Swiss-based head of the OECD’s review board and ex-chief economist for the Bank for International Settlements…
White said there was an intoxicating optimism at the top of every unstable boom when people convince themselves that risk is fading, but that is when the worst mistakes are made. Stress indicators were equally depressed in 2007 just before the storm broke.
This time central banks are holding a particularly ferocious tiger by the tail. Global debt ratios have surged by a further 51 percentage points of GDP since the Lehman crisis, reaching a record 327 per cent (IIF data)…
Credit in dollars beyond U.S. jurisdiction has risen fivefold in 15 years to over $10 trillion. “This is a very big number. As soon as the world gets into trouble, a lot of people are going to have trouble servicing that dollar debt,” said White. Borrowers would suffer the double shock of a rising dollar, and rising rates…
“We are running out of ammunition. I am afraid that at some point this is going to be resolved with a lot of debt defaults. And what did we do with the demographic dividend? We wasted it,” he said.
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