Thursday, October 08, 2015

$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF

Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.

Emerging market companies have "over-borrowed" by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF's Global Financial Stability Report.

This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF's twice yearly report.

The Fund warned there was no margin for error for policymakers navigating these hazardous risks.

The slightest miscalculation, they said, could collapse into a "failed normalisation" of interest rates and market conditions, wiping 3pc from the world's economic output over the next two years. 

Read the rest here.

1 comment:

rabidgandhi said...

This is the termite warning the house might collapse.

For some reason in these little warnings the IMF always forget to mention that they played a major role in creating the situation in the first place by creating the atmosphere for QE and ZIRP, and by pushing the austerity that is preventing economies from recovering to the point where they can normalise interest rates/stop the flow of funny money to emerging markets.