Saturday, November 11, 2017

Jean-Claude Trichet and others on the danger of a new, dramatic global crisis

Jean-Claude Trichet
Former ECB president Jean-Claude Trichet recently warned about the danger of a new, more serious crisis than the one we have been facing over the last ten years. "At the global level, considering the level of total indebtedness as a proportion of the world's consolidated GDP as a good indicator of vulnerability, we are more vulnerable to a global financial crisis today than in 2008," he said in an interview with the Swiss journal Le Temps.

I sent the interview with Trichet to a Fondad Group of forty international experts on the global financial system (FG-40) asking them for more in-depth analysis of the problem, and their view on how to improve the global financial system and prevent the emergence of a new, dramatic global crisis.
 

Robert Aliber
Robert Aliber, famous expert and author of the classical The New International Money Game, was the first one to react, in a sarcastic or ironic way: "How many memoirs are there on the continent [Europe] of central bankers who were in power at the time of the crisis..." 

Christian Ghymers commented a few hours later: "As you know, we share Trichet's view and see also the next big(gest) crisis around the corner - and this time without rooms for manœuvre - except if the SDR could be effectively mobilized and transformed rapidly along the lines we try to push with Triffin Foundation (RTI) and our publications and interventions, in particular at the G20 Ministerial last year (see my PowerPoints attached) and in other joined short publications."

Christian Ghymers
Christian Ghymers and I are both on the Board of the Triffin Foundation (RTI). We got to know each other in the 1980s when Christian worked with Robert Triffin and I, because of my research into the root causes of the global debt problem, went to visit Triffin in Louvain-la-Neuve and had long conversations with him - see "The International Monetary Crunch: Crisis or Scandal?", Alternatives, July 1987. 

Andrew Sheng
Andrew Sheng, former central banker (he was Deputy Chief Executive, Hong Kong Monetary Authority) and author of, among other books, Shadow Banking in China, was the third of the Fondad Group of 40 experts to react. He said, "Congratulations, Christian, for spelling out the pros and cons of moving to the SDR system. The issue has always been political, with the incumbent resisting any ideas for change unless there is crisis." 

In a next post, I will highlight the views from the FG-40 on how to prevent the emergence of a new, dramatic global crisis.

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