Financial Markets and Inflation
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Publication Date:
May 29, 2008
It is a crisis of confidence. Counterparties are suspicious of each other’s balance sheets. Financial innovation and new financial business models have aided in the process, but, although they are certainly co-conspirators, they are not the primary cause. These effects will intensify to trigger a long multiyear global slowdown. This slowdown will be led by
weakness that is becoming more evident in Europe and Japan. However, growth rates in emerging markets, fed by the same global liquidity that has lifted economic activity levels in many sectors and countries, will become increasingly fragile.
