IGTA Journal - Autumn 2017

residents of a district grouped together to arrange a watchman for themselves, to be forewarned of threats. With the onset of globalisation, international bodies and other supervisors have taken over from these worthy watchman, with a certain measure of success. Arguments from the left and the right ask us to think that, as in 2006, some knowledgeable economists together with the IMF are asking us to believe that commercial banks are stronger and perhaps less vulnerable to shocks affecting lending or the economy. What a load of nonsense! The economy runs on trust and when it disappears suddenly, the whole lot turns into a house of cards. Current imbalances suggest that the risk of readjustment or rerating and a sharp correction cannot be discounted. All the ingredients are there, although that does not in any way mean there is a crisis. We must not talk about the end of the world like doom-mongers. There have been plenty of predictions, but reality has thankfully proved them to be wrong. Higher borrowings and money printing, Brexit and the imbalance in the balance of power that the loss of the UK will have, particularly for the smaller countries, is a major risk that many people would prefer to ignore. Brexit looks as if it may be a Pyrrhic victory for the continental Europeans. The slump in commodity prices, and the price of oil in particular, together with the weakness of the dollar, give cause for some concern in the medium term. Some oil producers are heading for disaster in a race to the bottom, racking up deficits. Imbalances seem to be on the increase as never before. The money supply is increasing without its effects being passed on fully to the real economy. The market has no appetite for it, and this surge of liquidity deepens the ditches even further. The economy seems to have reached an impasse with debt growing faster than wealth creation. Interest rates have hit the floor (less than zero percent in some cases), but the world's debt burden has nevertheless increased by over 200% of world GDP, which is about 40% more than in 2008. The system might be compared to a bike setting off a full speed, which could tip over if it slows down too much. Low interest rates have fuelled stock market and real estate speculation, as we mentioned above. The financial markets are no longer worried because they are on an overdose of monetary morphine, so to speak, which stops them feeling any pain and leaves them seeing economic events through rose-tinted glasses. We have averted our eyes from the vulnerabilities and to a certain extent created new IGTA eJournal | Autumn 2017 | 43